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puts and calls

puts and calls, in securities trading. A call is a contract that gives the holder the right to purchase a given stock at a specific price within a designated period of time. It is the opposite of a put, which is a contract that allows the holder to sell a given stock at a specific price within a designated period of time. Puts and calls are both types of privileges, or options, that add flexibility to the securities market. In return for a put or call, the investor pays a fee to the potential buyer or seller of the stock (the maker), who, in turn, pays a commission to the broker who brought the two parties together. Calls are generally used by investors who want to profit from a rise in stock prices but, at the same time, want to avoid sharp losses. Thus, an investor holding a call chooses one of two options. If the market advances he can buy the designated security at the lower price quoted in the call, and then sell the stock at a profit. If the market declines, he can simply exercise his option not to buy the stock, thereby avoiding a major loss, the only expense being the cost of the option. A put is used by investors seeking to profit from a fall in stock prices. For example, an investor holding a put for a stock that declines in price is able to sell the stock at the higher price quoted in the put, thereby profiting by the amount the stock declines from the put price; if the stock price rises the investor can lose only the money used to purchase the put option. Puts and calls are generally written for one, two, three, or six months, although any period over 21 days is accepted by the New York Stock Exchange. A straddle and a spread are combinations of puts and calls occasionally used by sophisticated investors. In a more generalized sense, the term call may refer to any demand for payment.

See P. Sarnoff, Puts and Calls: The Complete Guide (1970); L. Engel, How to Buy Stocks (5th rev. ed. 1971).

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"puts and calls." The Columbia Encyclopedia, 6th ed.. . Encyclopedia.com. 21 Aug. 2017 <http://www.encyclopedia.com>.

"puts and calls." The Columbia Encyclopedia, 6th ed.. . Encyclopedia.com. (August 21, 2017). http://www.encyclopedia.com/reference/encyclopedias-almanacs-transcripts-and-maps/puts-and-calls

"puts and calls." The Columbia Encyclopedia, 6th ed.. . Retrieved August 21, 2017 from Encyclopedia.com: http://www.encyclopedia.com/reference/encyclopedias-almanacs-transcripts-and-maps/puts-and-calls

Options Exchanges

OPTIONS EXCHANGES

OPTIONS EXCHANGES. An options exchange is an organized securities exchange that provides a location and framework for trading standardized option contracts. It handles its trades much as a stock exchange handles trading in stocks and bonds. Until 1973, with the opening of the Chicago Board Options Exchange (CBOE), all options were traded through a limited number of specialized firms. Today, among the options exchanges in the United States are the American Stock Exchange, CBOE, the Chicago Board of Trade, the Chicago Mercantile Exchange, Mid-America Commodity Exchange, the Pacific Exchange, the Philadelphia Stock Exchange, and the International Securities Exchange.

BIBLIOGRAPHY

Goodman, Jordan E. Everyone's Money Book. 3d ed. Chicago: Dearborn Financial Publishing, 1998.

Kaufman, Perry. Trading Systems and Methods. 3d ed. New York: Wiley, 1998.

Meg GreeneMalvasi

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"Options Exchanges." Dictionary of American History. . Encyclopedia.com. 21 Aug. 2017 <http://www.encyclopedia.com>.

"Options Exchanges." Dictionary of American History. . Encyclopedia.com. (August 21, 2017). http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/options-exchanges

"Options Exchanges." Dictionary of American History. . Retrieved August 21, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/options-exchanges