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What are call and put options?

If you are expecting a share price to rise, you could buy a call option. It is the right to buy a share. If you are expecting a price to fall, you could buy a put option. That is the right to sell a share. You can make money whether markets are rising or falling.

The long call option strategy

If you are following a long call option strategy, you would buy a call option in the expectation that the underlying share will increase in value, enbling you to make a profit.

The long put option strategy

If you are following a long put option strategy, you would buy the put option and make a profit if the underlying share falls in value. It may seem strange to buy anything based on a share that you expect to lose value, but to profit from a downside move, you would buy an option: the put option.

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