I’ve read a few option books.
THANKS... This is probably the most comprehensive "greeks" article/book I’ve read.

Wonderful blog. …..
A wonder wealth of knowledge there. Thanks so much for your kindness in publishing it!

Thank you very much for the most concise and simplest option intro. Highly recommended.

So far, yours is the best blog/site on basic options notes in the web that I have chanced upon.

Friday, April 20, 2007

When Should You Buy / Sell Call or Put Option?

As we know, buyers would profit if they buy a security at lower price and sell it at a higher price (Buy Low, Sell High), while Sellers would profit if they sell a security at higher price and then buy it back to close their position at a lower price (Sell High, Buy Low).

Since Call option price goes up when the underlying stock’s price goes up, and vice versa, we would buy a Call Option if we are bullish and expect a stock will increase before option expires.
On the other hand, we will sell or "write" a Call Option if we are bearish and anticipate a drop in the underlying stock’s price before the option’s expiration date, or if we expect the stock price to move sideways.

As for Put options, since Put option price increases when the underlying stock’s price decreases, and vice versa, we will buy a Put Option if we are bearish and foresee a stock will move downwards before option expiration. Conversely, we will sell or “write” a Put Option if we are bullish and expect a stock will move up before option expires, or if we think the stock price will go nowhere.

However, before you decide if you should be a buyer or seller, it is extremely crucial to understand potential risk & rewards for options buyer vs. seller.

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