Going Short in Call - vs - Going Long in PUT ??

Dear Seniors,

Im Rupesh once again with a quetion, hope you answer like previous

Im new at all, i have just learned about Futures and Options in ICICI Direct web site, but still little bit confused about

Going Short in a Call / Going Long in a Put Option,

What is the difference between these two actions.

Also, please explain with simple examples,
===== In a Call Option
------------- Going Long. ( im paying margin. )
------------- Going Short.( im getting margin !!!??? confused )

===== In a PUT Option
------------- Going Long.
------------- Going Short.


I know I have to learn more more n more... please provide any website explaining briefly regarding Dervatives Trading.

The only thing which i can give against
THANK YOU ALL

Calls: Buy a call = Going Long = you are bullish

Calls: Sell a call = Going short = You are bearish

Puts: Buy a put = Going long = You are bearish

Puts: Sell a put = Going short = You are bullish

Whenever you sell an option, you have to keep a margin. Option buyers pay the price of buying (known as the Premium) to the Option sellers.

Hope this clears up your confusion. Just to make it more simple, if you are say bullish about a stock, then you can buy a call option. Same thing can be achieved by selling a put.

Go to www.investopedia and see the articles under f/o.

ss

Also go through this post by Beginner_av: http://www.traderji.com/82024-post31.html

Try to read his thread: http://www.traderji.com/options/11830-giant-thread-options.html

Praveen.

nice info, thanx both of you,

Normally one can sell (short) in an out of the money (higher strike price) call option to gain some premium. It however has unlimited loss in case the value goes much above the strike price.

Going Long (buying a put option with a strike price lower than the market price) in a put is basically to protect your downside in case you are holding shares in the cash market. It also helps in making money in case the market crashes - then the buyer of the put option will make money by a higher premium than what the person bought it at.

Hope this clarifies

Incidentally Sunil,could u kindly explain as to why the phrases "Straddle & Strangle" are used in options.I mean not when they are used,but why they are used in relation to dictionary meaning.
ranga

Strangle is when you Buy / Sell a Call and Put Option having different strikes but same Expiry.

Ex: If you Buy a 4200 Nifty Put and a 4400 Nifty Call, you are long Strangle

Straddle is when you Buy / Sell a Call and Put Option having same strike and same Expiry

Ex: If you Sell a 4300 Nifty Call and a 4300 Nifty Put, you are short Straddle.

If you do both of the above, its called a Gut Strangle.

Cheers

DT

Hi Ranga,

Good question. I have no idea! but let me try ... The dictionary meaning of a Straddle - be astride, sit astride, be on both the sides... matches well with the Straddle strategy as puts and calls are bought /sold at the same strike.

The dictionary meaning of Strangle as we all know - choke, strangulate, throttle, smother, squeeze the life out of ..... doesn't match with the Strangle strategy!

ss

Exactly Sunil,Strangle eludes an answer.Could someone explain pl?
ranga