Bullish

Investors who believe that a stock price will increase over time are said to be bullish. Investors who buy calls are bullish on the underlying stock. That is, they believe that the stock price will rise and have paid for the right to purchase the stock at a specific price known as the exercise price or strike price. An investor who has sold puts is also considered to be bullish on the stock. The seller of a put has an obligation to buy the stock and, therefore, believes that the stock price will rise.

Bearish

Investors who believe that a stock price will decline are said to be bearish. The seller of a call has an obligation to sell the stock to the purchaser at a specified price and believes that the stock price will fall and is therefore bearish. The buyer of a put wants the price to drop so that they may sell the stock at a higher price to the seller of the put contract. They are also considered to be bearish on the stock.

  Calls Puts
Buyers

Bullish:

Have right to buy stock, want stock price to rise

Bearish:

Have right to sell stock, want stock to fall

Sellers

Bearish:

Have obligation to sell stock, want stock price to fall

Bullish:

Have obligation to buy stock, want stock price to rise

Buyer Vs. Seller

Buyer   Seller
Owner Long Know as Writer Short
Rights Has Obligations
Maximum Speculative Profit Objective Premium Income
With an Opening Purchase Enters the contract With an Opening Sale
Exercise Wants the option to Expire

 

Need Help Passing Your Series 4 Exam?

Possible Outcomes For An Option

Related Articles
  1. Investing

    What are Options Contracts?

    An explanation of options contracts, call options and put options.
  2. Investing

    The Ins And Outs of Seller-Financed Real Estate Deals

    There's more than one way to buy or sell a house. Seller financing presents yet another unique option.
  3. Trading

    How to Sell Put Options to Benefit in Any Market

    As long as the underlying stocks are of companies you are happy to own, put selling can be a lucrative strategy.
  4. Trading

    When Should I Sell A Put Option Vs A Call Option?

    Beginning traders often ask not when they should buy options, but rather, when they should sell them.
  5. Trading

    Introduction To Put Writing

    Learn about a strategy that may be appropriate if you have a positive outlook on a stock.
  6. Trading

    How to Trade Options on Government Bonds

    A look at trading options on debt instruments, like U.S. Treasury bonds and other government securities.
  7. Trading

    Options Strategies for Your Portfolio to Make Money Regularly

    Discover the option-writing strategies that can deliver consistent income, including the use of put options instead of limit orders, and maximizing premiums.
  8. Trading

    Solving Mixed Options Problems On The Series 7

    Learn to ace the questions that involve both options contracts and stock positions.
Frequently Asked Questions
  1. Is there a maximum amount of stock an individual investor or corporation can purchase?

    The short answer is that there is no limit to the number of shares one entity may own in a specific company. The long answer ...
  2. Why don't stocks begin trading at the previous day's closing price?

    Between the closing bell and the next opening bell, a number of factors can affect the attractiveness of a particular stock ...
  3. What is the relationship between oil prices and inflation?

    Understand how the price of oil and inflation are often seen as being connected in a cause and effect relationship.
  4. What is the difference between a logarithmic price scale and a linear one?

    The interpretation of a stock chart can vary among different traders depending on the type of price scale used when viewing ...
Trading Center