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When regarding stocks, why are put options sometimes better than call options, and other times it's...

When regarding stocks, why are put options sometimes better than call options, and other times it's the reverse. How can investors make money while using either a put or a call options?

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Answer #1

A call option allows an investor to buy the underlying asset at the strike price anytime before expiry. This is useful in situations when the prices are rising. A put option allows the investor to sell the asset at the strike price. This is beneficial in situations when the prices are falling.

When a call option is purchased, the buyer can make money by buying a security at a price lower than the market price. Profit = Market price- Strike price- Premium

When put option is purchased, investor can make profits by selling at a price higher than market price.

Profit = Strike- Market price- Premium

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