Skip to main content
Select Source:

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).

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"puts and calls." The Columbia Encyclopedia, 6th ed.. . Encyclopedia.com. 19 Sep. 2018 <http://www.encyclopedia.com>.

"puts and calls." The Columbia Encyclopedia, 6th ed.. . Encyclopedia.com. (September 19, 2018). http://www.encyclopedia.com/reference/encyclopedias-almanacs-transcripts-and-maps/puts-and-calls

"puts and calls." The Columbia Encyclopedia, 6th ed.. . Retrieved September 19, 2018 from Encyclopedia.com: http://www.encyclopedia.com/reference/encyclopedias-almanacs-transcripts-and-maps/puts-and-calls

Learn more about citation styles

Citation styles

Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).

Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.

Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:

Modern Language Association

http://www.mla.org/style

The Chicago Manual of Style

http://www.chicagomanualofstyle.org/tools_citationguide.html

American Psychological Association

http://apastyle.apa.org/

Notes:
  • Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
  • In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.

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

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Options Exchanges." Dictionary of American History. . Encyclopedia.com. 19 Sep. 2018 <http://www.encyclopedia.com>.

"Options Exchanges." Dictionary of American History. . Encyclopedia.com. (September 19, 2018). http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/options-exchanges

"Options Exchanges." Dictionary of American History. . Retrieved September 19, 2018 from Encyclopedia.com: http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/options-exchanges

Learn more about citation styles

Citation styles

Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).

Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.

Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:

Modern Language Association

http://www.mla.org/style

The Chicago Manual of Style

http://www.chicagomanualofstyle.org/tools_citationguide.html

American Psychological Association

http://apastyle.apa.org/

Notes:
  • Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
  • In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.