Options

Call - if I sell a call I promise to sell the stock in the agreed upon price if the buyer of the
call will be interested in buying it from me in the future.
This obligation of mine will expire on the agreed upon date.

if I buy a call I am guaranteed to be able to buy the stock with the agreed upon price if
I will be interested in it in the future.
This guarantee to me will expire on the agreed upon date.

Put -if I sell a Put I promise to buy the stock in the agreed upon price if the buyer of the
put will be interested in selling it to me in the future.
This obligation of mine will expire on the agreed upon date.

if I buy a put I am guaranteed to be able to sell the stock with the agreed upon price if
I will be interested in it in the future.
This guarantee to me will expire on the agreed upon date.


An example of buying a call versus Buying the stock.

Stock price is 47$.
buying the call cost 3.5$ with the option to buy the stock for the price of 45$ during the next 3 month.
So you will spend 350$
After one month the stock reach 51$ and you buy it. You made a profit of (you have to buy packs of 100):

100*( 51-45-3.5) = 100* 2.5 - 250 which is 71.4%

If you would buy the stock you would make:

100*(51 -47) = 100 * 4 = 400

but because you invested 4700$ you made only 8.5% on your money!!!!!

Huh?!.... but don't forget that if the stock would go under 45..... you would lose 100% of your money......Urg......