Glossary

As we have seen, options provide a means of gaining exposure to the price movement of a share or in fact any underlying financial asset.

Buying a Call Option allows the holder to profit from a rise in the share price. Buying a Put Option on the other hand, provides a profit if the share price falls.

Similarly it is possible to sell an option in the hope that it will not be exercised and so keep the premium as a profit.

The payoff graphs below show the returns provided by each of the four main option strategies: