# Calls and Puts > A call gives the right to buy and a put gives the right to sell at a set price. Learn how calls and puts work, how they profit and how buyers and sellers differ. Source: https://learn.tradelabsai.com/options/calls-and-puts/ Track: Options · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Calls and Puts", https://learn.tradelabsai.com/options/calls-and-puts/ Every option is either a call or a put. A call option gives its buyer the right to buy the underlying asset at the strike price. A put option gives its buyer the right to sell the underlying at the strike price. Calls gain value when the underlying rises; puts gain value when it falls. Everything else in options, from income strategies to complex spreads, is built from combinations of calls and puts, bought or sold. ## Calls at a glance A call is a bet that the price will rise above the strike, or a way to lock in a purchase price. | | Call buyer | Call seller | |---|---|---| | View | Bullish | Neutral to bearish | | Pays or receives | Pays premium | Receives premium | | Profit when | Price rises above strike plus premium | Price stays below strike | | Maximum loss | Premium | No upper limit (uncovered) | | Maximum gain | No upper limit | Premium | *Figure: A long call at expiration: the most you can lose is the premium.* ## Puts at a glance A put is a bet that the price will fall below the strike, or insurance against a decline. | | Put buyer | Put seller | |---|---|---| | View | Bearish, or hedging | Neutral to bullish | | Pays or receives | Pays premium | Receives premium | | Profit when | Price falls below strike minus premium | Price stays above strike | | Maximum loss | Premium | Strike minus premium (if price goes to zero) | | Maximum gain | Strike minus premium | Premium | *Figure: A long put at expiration: profit grows as price falls, down to zero.* ## Worked examples **Example: A call and a put on the same stock** A stock trades at $100. A $105 call costs $3 and a $95 put costs $2.50. Each contract covers 100 shares. - **Stock rises to $115 at expiry:** the call is worth $10 ($115 minus $105). Profit = ($10 minus $3) × 100 = $700. The put expires worthless: loss $250. - **Stock falls to $85:** the put is worth $10 ($95 minus $85). Profit = ($10 minus $2.50) × 100 = $750. The call expires worthless: loss $300. - **Stock ends at $100:** both expire worthless. The call buyer loses $300; the put buyer loses $250. ## Break even points ``` call break even = strike + premium put break even = strike - premium ``` The $105 call bought for $3 breaks even at $108 at expiration; the $95 put bought for $2.50 breaks even at $92.50. ## Four basic positions Combining buying and selling with calls and puts gives four building blocks: | Position | View | Lesson | |---|---|---| | Long call | Bullish | [Long Call](https://learn.tradelabsai.com/options/long-call/) | | Short call | Bearish or neutral | [Short Call](https://learn.tradelabsai.com/options/short-call/) | | Long put | Bearish | [Long Put](https://learn.tradelabsai.com/options/long-put/) | | Short put | Bullish or neutral | [Short Put](https://learn.tradelabsai.com/options/short-put/) | Every multi leg strategy, such as spreads, straddles and condors, combines these four. See [Vertical Spreads](https://learn.tradelabsai.com/options/vertical-spreads/) and [Straddle](https://learn.tradelabsai.com/options/straddle/). ## Calls, puts and the underlying Calls and puts are linked to the underlying and to each other through [Put-Call Parity](https://learn.tradelabsai.com/options/put-call-parity/): a long call plus a short put at the same strike and expiry behaves like owning the underlying. This relationship explains why traders can build "synthetic" positions. See [Synthetic Positions](https://learn.tradelabsai.com/options/synthetic-positions/). ## A memory aid - **Call up:** you "call" the asset to you, so you want the price to rise. - **Put down:** you "put" the asset onto someone else, so you want the price to fall. ## Common mistakes - **Confusing buying a put with selling a call.** Both are bearish, but the risks are very different. - **Ignoring the premium** when calculating break even. - **Forgetting the 100 share multiplier** on US stock options. ## Frequently asked questions ### What is the difference between a call and a put? A call gives the right to buy at the strike price and gains when prices rise; a put gives the right to sell at the strike price and gains when prices fall. ### Is buying a put the same as short selling? Both profit from a fall, but a put buyer's loss is limited to the premium, while a short seller has no upper limit on losses if the price rises. ### Can you sell a call without owning the stock? Yes, that is an uncovered or naked call. It carries risk with no upper limit and requires a high level of broker approval. Next, learn how the strike price shapes every option in [Strike Price](https://learn.tradelabsai.com/options/strike-price/). ## Continue learning - Next lesson: [Strike Price](https://learn.tradelabsai.com/options/strike-price/) - Previous lesson: [How Options Work](https://learn.tradelabsai.com/options/how-options-work/) - Related: [How Options Work](https://learn.tradelabsai.com/options/how-options-work/): Options give the right, but not the obligation, to buy or sell an asset at a set price by a set date. Learn how options work, why traders use them and the key terms. - Related: [Long Call](https://learn.tradelabsai.com/options/long-call/): A long call is buying a call option to profit from a rise with limited risk. Learn the payoff, break even, how to choose strike and expiry, and common pitfalls. - Related: [Long Put](https://learn.tradelabsai.com/options/long-put/): A long put is buying a put option to profit from a decline or to hedge. Learn the payoff, break even, long put vs short selling and how to choose strikes. - Related: [Short Call](https://learn.tradelabsai.com/options/short-call/): A short call sells a call option to collect premium, profiting if the price stays below the strike. Learn the payoff, uncapped risk, margin and safer alternatives. - Related: [Short Put](https://learn.tradelabsai.com/options/short-put/): A short put sells a put option to collect premium, profiting if the price stays above the strike. Learn the payoff, risks, margin and how it can buy stock. - Related: [Option Payoff Diagrams](https://learn.tradelabsai.com/options/option-payoff-diagrams/): Payoff diagrams show an option position's profit or loss at expiration across prices. Learn to read and draw them for single options and multi leg strategies.