CALLS VS. PUTS
Plain English
Call = Right to BUY at a specific price (you want the stock to go UP). Put = Right to SELL at a specific price (you want the stock to go DOWN). These are the two building blocks of every options strategy.
Going deeper
The entire options market is built on two instruments: calls and puts. A Call option gains value as the underlying stock price rises because the right to buy at a fixed lower price becomes more attractive. A Put option gains value as the underlying stock price falls because the right to sell at a fixed higher price becomes more attractive. Every contract has a buyer and a seller. Buying a call is bullish, selling a call is bearish or neutral. Buying a put is bearish, selling a put is bullish or neutral. Understanding this duality is foundational to every strategy.
Examples
The Bullish Call
You think Tesla will have a great earnings report. You buy a Call option with a strike price of $250 for $5.00. When the stock spikes to $280 after earnings, the value of your call surges because you have the right to buy shares at $250 that are now worth $280.
The Bearish Put
You think a retailer is heading for trouble. You buy a Put option with a $20 strike for $1.00. The stock crashes to $5. You can buy shares at $5 in the open market and exercise your put to sell them for $20, netting $14 per share profit after the premium.