[Verse 1] Let me tell you 'bout derivatives today Options are contracts that show you the way Calls and puts are the basic two kinds Understanding these will expand your mind Strike price and expiration date Premium paid determines your fate [Chorus] Call it up when you think it'll rise Put it down when the price says goodbye Buy the right but not obligation Sell for income and speculation Options basics, learn them well Call to buy and put to sell [Verse 2] A call option gives you the right to buy At strike price before expiry If the stock goes up beyond your strike Exercise the call and take what you like But if it stays low, let it expire You only lose premium, nothing more dire [Chorus] Call it up when you think it'll rise Put it down when the price says goodbye Buy the right but not obligation Sell for income and speculation Options basics, learn them well Call to buy and put to sell [Verse 3] A put option gives you the right to sell At strike price, it works quite well When stock price drops below your strike Exercise the put, that's what you'd like Protection from falling market trends Put options help when the bear market descends [Chorus] Call it up when you think it'll rise Put it down when the price says goodbye Buy the right but not obligation Sell for income and speculation Options basics, learn them well Call to buy and put to sell [Bridge] American style, exercise anytime European style, wait for the deadline Time value fades as expiration nears Volatility drives both hopes and fears Moneyness tells you where you stand In the money puts profit in your hand [Verse 4] Long positions mean you buy the right Short positions collect premium upfront Intrinsic value plus time value too That's the premium that's paid by you Greeks will measure your option's risk But that's a lesson for another disk [Chorus] Call it up when you think it'll rise Put it down when the price says goodbye Buy the right but not obligation Sell for income and speculation Options basics, learn them well Call to buy and put to sell [Outro] Now you know the foundation strong Options basics in this song Calls and puts will pave the way For strategies another day
← Implied Volatility and Volatility Patterns | Forward Contracts Basics →