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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