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Homework answers / question archive / 15) Explain the terms long call, short call, covered short call, long put, short put
15) Explain the terms long call, short call, covered short call, long put, short put. Which have rights and which have obligations?
| Term | Definition | Right | Obligation | |
| 1. Long call | Long call option means you have an option to purchase the stock you do not own. We take a long call option when we expect the stock prices to go up. (Bullish) | Yes | No | |
| 2. Short call | Short call option means you have an obligation to sell the stock you do not own. We take a short call option when we expect the stock prices to go down. (Bearish) | No | Yes | |
| 3. Covered short call | Covered short call option means you own the stock that you are selling call options on.There are typically three different reasons why an investor might choose this strategy:
|
No | Yes | |
| 4. Long put | Long put option means you have an option to sell the stock you do not own. We take a long put option when we expect the stock prices to go down. (Bearish) | Yes | No | |
| 5. Short put |
|
No | Yes |
When you go long - you have the right to exercise the option
when you go short - you have the obligation to exercise the option
