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L.1 · BEGINNER · 3 MIN

Calls and Puts: The Building Blocks

There are only two types of options: calls and puts. Every options strategy — no matter how complex — is built from these two building blocks.

Quiz · 5 questions ↓

Live data

AAPL — Current Price, Today's Change. Open AAPL on the Ledge to see current values.

Compare

Call OptionPut Option
Right to...BUY 100 shares at strike priceSELL 100 shares at strike price
You profit when...Stock rises above strike + premiumStock falls below strike − premium
Max loss (buyer)Premium paidPremium paid
Max gain (buyer)Unlimited (stock can rise indefinitely)Strike price − premium (stock can fall to $0)
You’re bullish?Buy a callSell a put
You’re bearish?Sell a callBuy a put

Key point

Every option contract controls 100 shares. A call priced at $3.00 costs $300 ($3 × 100 shares). This leverage is what makes options powerful — and dangerous.

Formula

Option Cost = Premium × 100 shares

Try it

Look up any stock in **Fundamentals**. If you’re bullish on it, you’d buy a call. If bearish, you’d buy a put. Note the current price — that’s what you’d compare strike prices against.

Check-in

You buy a $150 call for $5 when the stock is at $148. At expiration, the stock is at $158. What’s your profit per share?

Key insight

Options let you define your risk. Unlike shorting a stock (unlimited risk), buying a put limits your loss to the premium paid. This defined-risk property is why options exist.

Note

Selling options is fundamentally different — read this before you trade

Selling options without a hedge has very different risk than buying. Naked short calls have theoretically unlimited loss (the stock can rise to any price); naked short puts have bounded but very large loss (strike x 100 minus premium received — on a $100-strike put, you can lose up to $9,700 per contract if the stock goes to zero). Do not sell options without completing a more advanced course on spreads and defined-risk structures. FINRA's options-approval framework treats short uncovered options as level 4-5 — many brokerages will not permit them at retail level 1 precisely because of this asymmetric risk profile.

Check-in

You buy an AAPL $200 call expiring in 30 days. AAPL is at $195. What happens at expiry if AAPL is at $210?
Check your understanding

Sit with the ideas.

You buy a call option with a $150 strike on a stock currently trading at $140. The option costs $3.00. What is your maximum possible loss?

Why:
Continue this lesson in the appAdaptive practice · saves your progress · remediation when you miss
Try this in paper trading

Buy 100 shares of a covered-call candidate

Pick a stock you'd be comfortable selling at 10% above today's price. Paper-buy 100 shares (a standard options contract size). Journal what strike + expiration you'd write a covered call at, even though we're not paper-trading options at v1.

Open paper portfolio →

Practice mode — simulated trades, not investment advice.

Other lessons in this course.

  1. 01Calls and Puts: The Building Blocks— reading now
  2. 02Options P&L: Calculating Profit and Breakeven
  3. 03Moneyness, and Reading Delta as Probability
  4. 04The Four Greeks: Delta, Theta, Gamma, and Vega
  5. 05Implied Volatility: The Options Market's Forecast
  6. 06Covered Calls, Cash-Secured Puts, and Protective Puts
  7. 07Intrinsic vs Time Value: The Two Halves of Every Premium
  8. 08Assignment, Exercise, and the Early-Exercise Surprise
Continue this lesson in the app →See it on a real ticker →