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SWASH

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tT
发表于 2011-7-13 15:23 | 只看该作者

long/short call/put

understand, agreement, physical, around
Hello All,
As I understand long is an agreement to buy a financial/physical asset in future, short is an agreement to sell an asset in future. Call is the right to buy an asset at a pre-determined price and put is the right to sell at a pre-determined price.
So what is:
long call
long put
short call
short put?
I simply can;t wrap my head around it.
Thanks,
P

 

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Londonrocks

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2#
发表于 2011-7-13 15:24 | 只看该作者
Long = bought
Put = sold

So a short-call position would mean you have sold a call option to someone else. Say you're short a 50-strike call with a premium of $3.50. That means that at expiration, the long call holder (person you sold to) has the right to buy the stock at 50 and you have an obligation to sell at 50. Say that at expiration, the stock is 100. You need to buy the stock at 100 and sell it to the call holder for 50, so you lose 50 on the position, but get to keep the $3.50 premium.

For short option positions, it sometimes helps to remember that the max profit for an option-writer happens when it expires out of the money, and the max profit for the option-writer is the option premium.

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dotamasta

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3#
发表于 2011-7-13 15:24 | 只看该作者
Thanks TiB
So if I short a put at 50 strike and 3.5 premium, I have to buy it at 50 from the person holding the long position. If the stock goes to 40, I still have to buy it at 50 (suffering a loss of 10) from long but I get to keep the premium?
Did I get it right?
P

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Bluetick1010

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4#
发表于 2011-7-13 15:24 | 只看该作者
Yes, you did get it right.
Long is buy so if you are short on a put, you have given someone the option to sell to you. If the other person chooses to transact (which he certainly will if the price goes to 40), you will have to buy from him for $50.

Long = Buy = Hold an option (the option could be to buy or sell)
Short = Sell = Write an option (you give the option to someone to buy or sell from you)

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JoeyDVivre

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5#
发表于 2011-7-13 15:24 | 只看该作者
Thanks TiB and Anish.

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