Buying
Put Option
V/s
Selling
Call Option
You buy put option or sell call option when you are aggressively bearish about the markets.
Let's learn about their differences.
1. Margin
Buying Put
requires no margin deposit with broker. You need to deposit high margin amount for
selling a call.
2. Risk/Reward
Buying put
has unlimited profit potential and limited loss potential.
Selling a call
has unlimited loss and limited profit potential.
When is it favorable to
buy put
?
When the implied volatility is low and there is plenty of time until expiry,
buying a put
is favorable.
When is it favorable to
sell call
?
When the implied volatility is high and there is less time till expiry,
selling a call
is favorable.
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