Buy a Call Option v Sell a Put Option

[FortyTwo]

CALL OPTION
I buy a CALL Option believing the stock will rise above my Strike price. I profit when I close that Option at a price above my Strike Price.

SHORTING a PUT OPTION
I short (sell) a Put option believing the stock will rise above my Strike price. I profit when I close that Option at a price above my Strike Price.

Both Option contracts profit when the Share Price rises above the Strike Price. If I believe that the Share price in Widget PLC is about to rise why would I choose one Option contract over the other?

Note1. I don’t hold any stock in Widget PLC.
Note2. I understand that the Premium received factors into the ‘profit’ equation with the Short Put Option

 

[newwurldmn]

If you think the stock price will rise faster than the implied vol, you buy the call if you think it will rise slower than the implied vol, you sell the put.

 

[Robert Morse]

This is hard to respond with brief responses, but I'll try. Feel free to call me later. If you buy a call option, you profit when the stock goes up and you exit the position at a higher option price. IF you wait to exit until expiration day, the stock needs to exceed the strike price by the premium paid and you need to be able to find a buyer at that price or higher. You do not have to wait until that day and can exit at any time. If the stock goes up slowly or if premiums contract, you can lose money if the stock does not go up enough from decay or IVOl contraction. If you sell a put you make money if the stock does not go down or if IVOl does not expand. You do not need the stock to go up. At expiration, if the Put is in the money, you will need to exit in order to avoid being put the stock.

 

[cesfx]

CALL OPTION
I buy a CALL Option believing the stock will rise above my Strike price. I profit when I close that Option at a price above my Strike Price.

SHORTING a PUT OPTION
I short (sell) a Put option believing the stock will rise above my Strike price. I profit when I close that Option at a price above my Strike Price.

Both Option contracts profit when the Share Price rises above the Strike Price. If I believe that the Share price in Widget PLC is about to rise why would I choose one Option contract over the other?

Note1. I don’t hold any stock in Widget PLC.
Note2. I understand that the Premium received factors into the ‘profit’ equation with the Short Put Option

I think you are trying to oversimplify the learning curve of one of the most complex trading instrument.
They can't be learned on YouTube or a forum by asking question, because you would be missing plenty of essential steps, a that transpires on your questions.
It would be like trying to compete at a chess world championship after having played a few times online.
There are some classic books where you can learn the multidimensional world of options. Learn about the Greeks (not the ancient history) and maybe ask question later

 

[FortyTwo]

If you think the stock price will rise faster than the implied vol, you buy the call if you think it will rise slower than the implied vol, you sell the put.

Thanks. I'd be grateful for a brief explanation (example). I can understand how I might believe a stock is going to rise to x in y days but how do I match that / compare that with the implied volatility?

 

[FortyTwo]

if the Put is in the money, you will need to exit in order to avoid being put the stock.

Thanks - I'd be grateful if you could explain (explain the process) 'being PUT the stock

 

[FortyTwo]

I think you are trying to oversimplify the learning curve of one of the most complex trading instrument. They can't be learned on YouTube or a forum

Thanks - I have learned a LOT from You Tube and now this forum AND I am painfully aware that whilst I have learned a lot it's an iceberg and so far I have just chipped away a few pieces but in my life I've tackled many icebergs and I know that if I keep chipping away at it I will beat it.

 

[cesfx]

Seriously, this is not linear trading. You can learn linear trading on youtube.
The basics are essential with this instruments and are complicated enough that you need to read hundreds of pages to realise you need to read it again...
You need to know the effect of the Greeks on premiums, moneyness and much much more.
By chipping away you will leave details behind that will come back and hit the account or the learning process.

 

[cesfx]

I am only trying to make your life easier.
Option trading experts normally wouldn't even bother replying to question that shows very low knowledge level.
That's why someone already adviced you to read a book on it in your other thread. That advice was gold.

 

[cesfx]