There are two types of options:
A call option gives you the right, but not obligation, to buy the underlying asset.
A put option gives you the right, but not obligation, to sell the underlying asset.
Besides two types of options, there are two sides to every option trade: you can buy an option, or you can sell an option.
Therefore, the are four things you can do with options:
Buying a call option is not the same thing as selling a put option, and buying a put is different from selling a call. These positions are all very different. They differ in two dimensions:
While a call option buyer gets the right, but not obligation, to buy the underlying asset at the option’s strike price, the call option seller (the other party of the option trade) takes an obligation to sell the underlying asset to the call option buyer if the buyer chooses to exercise the option.
While an option buyer has a right but not obligation, an option seller has the opposite position: obligation but not right. The option seller’s outcome depends on the option buyer’s will.
A put option buyer has the right, but not obligation to sell the underlying asset for the strike price, while the put option seller has the obligation to buy the underlying asset from the put option buyer, if the option buyer chooses to exercise the option.
If the above seems confusing, remember there are two different securities involved: the option and the underlying security.
Here is a summary:
Remember: