Answer:
A call option is an option to purchase a specified number of shares of a stock on or before some future date at a specified price, whereas a put option is an option to sell a specified number of shares of a stock on or before some future date at a specified price. straddle are purchased if the stock price is expected to fall.
Step-by-step explanation:
Call options may be purchased for speculation, or sold for income purposes. They may also be combined for use in spread or combination strategies.
A call buyer profits when the underlying asset increases in price.
Put options are traded on various underlying assets, including stocks, currencies, bonds, commodities, futures, and indexes.
Straddle strategy is when you simultaneously buy a call option and a put option on the same underlying stock with the same expiration date and strike price.
It is recommended to buy the option when the stock is undervalued or discounted. It is considered a low risk trade for investors because the cost of purchasing the call and put options is the maximum amount of loss the trader will face.