SOME COMMON MISCONCEPTIONS ABOUT PUTS AND CALLS
For this post, we talk about some common mistakes when talking about put and call options. Since the SIE exam covers options, mastering correct terminology before sitting for the exam is important. Let's consider call options first. The purchaser of a call option, on an opening transaction, gains the right to purchase stock or some other asset, such as gold or bonds, at a certain specified price for a specified period of time. The seller of a call, on an opening transaction, is called the "writer," and is obligated to sell stock or some other asset. Now speaking of puts, the buyer of a put option, on an opening transaction, gains the right to sell stock or some other asset, at a certain specified price for a specified period of time. The seller of a put, on an opening transaction, is called the "writer," and is obligated to purchase stock or some other asset. Bob Eder's text Study for the SIE Exam contains a full discussion of put and call options in Chapt