LONG CALL vs SHORT PUT

Presented by:
Rohit Acharya F-1
Sanjay Dyavanapelli F-11
Govardhan Jilla F-17
Pravin Kolge F-22
What is Options ?

• Options are derivatives product

• Options give a trader the right but not a obligation to buy or sell a
stock at an agreed-upon price and date
• Investors use option for primary reasons to Speculate and to Hedge
their risk
• There are two types of options:
- Call Options
- Put Options
 Long Call

• Buying a call is called Long call.

• It gives the option buyer right but not an obligation to buy an
underlying asset at a predetermined price & time.
• Option buyer expects market to rise (bullish market)
• Profit potential is unlimited
• Loss is limited to the extent of the premium paid
• Break Even = Strike price + Option Premium
Long Call - Example

• Spot Price – INR 100

• Strike Price – INR 120
• Option Premium – INR 5

• Break Even – INR 125

Short Put

• Selling put means Short put

• This option seller has an obligation to buy the underlying asset at
a predetermined price & time
• Option seller expects market to rise (bullish market)
• Profit potential is limited to the extent of premium received
• Loss is unlimited
• Break Even = Strike price – Premium received
Short Put - Example

• Spot Price – INR 100

• Strike Price – INR 80
• Option Premium – INR 5

• Break Even – INR 75

Conclusion

• If you check both strategies –

-When strike price reaches around INR 70 both options are in loss
of INR 5
-When the same price reaches around INR 130 both options are in
profit of INR 5
• The long call is widely used option in the market as it attracts
buyers with a statement “Unlimited profits & Limited losses”
whereas the short put is the option which is used by the people
who want regular income ( A short put is called an income
generating strategy)