Call / Put option

Call Option Explained

Are you familiar with Option to Purchase (OTP) when buying a property? Here is a PropertyGuru article on OTP. Basically OTP is a contract between buyer and seller, where buyer pay an option fee to secure the rights to buy the property at stipulated price within the option period.

Call Option is just like OTP, but it is an option to buy a stock/ETF instead of property. The option fee you pay is called Option Premium, the stipulated price to buy the underlying stock is called the Strike Price, and the option period is determined by the Expiration Date.

You buy a Call Option when you are bullish on the underlying stock before Expiration Date. When the underlying stock price rises, the Call Option can also rise in tandem (generally true, but can be held back by time decay as it gets nearer to Expiration Date).

Put Option Explained

Put Option is the opposite of Call Option. You pay an Option Premium for the rights to sell a stock you already owned at the Strike Price within the option period. Think of Put Option like an insurance or a hedge on the underlying stock you already owned.

For example, you bought 100 shares of Apple stock at $100, and it has risen to around $125 currently. You want to continue holding Apple shares for further upside, but are worried that a crash may be around the corner. So you pay $1 for a Put Option with Strike Price at $115 to protect your gain. Even if the crash really happens and Apple dropped to $80, you can exercise the Put Option and sell Apple shares at $115 and still make profits.​​​

Wow, you're asking for a lot tbh. Calls and Puts are hard to explain simply. But I think this YouTuber (InTheMoney) does it pretty well (and probably better than me too):

https://www.youtube.com/watch?v=SD7sw0bf1ms&t=132s

Anyways, as you research further into options, particularly selling options, you might come across strategies such as the wheel (link here), or covered calls (link). And since you posted this in the Tiger Brokers/Moomoo category, I also thought that it might be in your interest to know that Tiger and Moomoo do not support these strategies (as of 3 weeks ago). This is important because you can get easily liquidated at a loss due to this so if you're considering this, please use a proper options broker (IBKR/ TDA/ Tastytrade are all decent).​​​