Options Forum: Know Your Strategy

Would you please explain what the difference is between short-selling a call option and just buying the put option? -- M.C.

While both positions represent a bearish bet -- that is, they profit if the price of the underlying common stock declines -- they perform and produce very differently under the same set of circumstances.

Understanding the differences in cost, risk and price behavior of each position is crucial in determining which strategy best aligns with your predicted scenario. Do not confuse two similar bearish positions as being parallel, or replacements for each other -- a short call has a completely different profile than a long put. ...