Options basics
Calls and Puts Explained
Calls and puts are the building blocks of every multi-leg strategy. Master long vs short on each side before stacking spreads.
Long call (buy call)
You pay premium for the right to buy stock at the strike. Profit rises as the stock rises above strike + premium. Max loss is the premium paid. Max profit is theoretically unlimited.
Short call (sell call)
You collect premium and may have to sell stock at the strike if assigned. Profitable if the stock stays below the strike by enough that time decay helps. Naked short calls have unlimited upside risk; covered calls pair the short call with long stock.
Long put (buy put)
You pay premium for the right to sell stock at the strike. Profit rises as the stock falls. Max loss is premium paid. Max profit approaches strike × 100 if the stock goes to zero (for equity puts).
Short put (sell put)
You collect premium and may have to buy stock at the strike if assigned. Bullish-to-neutral income trade. Risk is large if the stock collapses; cash-secured puts hold cash for assignment.
Quick mental model
| Position | Outlook | Max profit | Max loss |
|---|---|---|---|
| Long call | Bullish | Unlimited | Premium |
| Short call (naked) | Bearish / neutral | Premium | Unlimited |
| Long put | Bearish | Large (to zero) | Premium |
| Short put | Bullish / neutral | Premium | Strike − premium (to zero) |
Next: Moneyness and expiration · Practice: Long Call calculator
Try it on the calculator
Theory sticks when you plot real strikes. Open a strategy and stress-test premiums on a payoff heatmap.