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Frequently Asked Questions About Put and Call Options

What is the difference between put and call options?

Put options give the holder the right to sell an asset at a set price, while call options give the right to buy. Puts profit when prices fall, calls when prices rise.

How can put-call ratios predict market moves?

The put-call ratio compares trading volumes of puts versus calls. High ratios suggest bearish sentiment, while low ratios indicate bullishness among traders.

What is put-call parity in options trading?

Put-call parity is a principle that defines the relationship between put and call prices for the same strike price and expiration date, ensuring no arbitrage opportunities exist.