The Key Difference Between Call Option and Put Option

call option vs put option
Feature	Call Option	Put Option
Definition	A contract giving the buyer the right to buy an asset at a specified price within a certain period.	A contract giving the buyer the right to sell an asset at a specified price within a certain period.
Purpose	Used to profit from an increase in the underlying asset's price.	Used to profit from a decrease in the underlying asset's price.
Buyer’s Expectation	Expecting the asset price to rise above the strike price.	Expecting the asset price to fall below the strike price.
Seller’s Obligation	Must sell the asset at strike price if buyer exercises.	Must buy the asset at strike price if buyer exercises.
Profit Potential	Unlimited profit potential as price can rise indefinitely.	Profit potential limited to the strike price minus premium paid (price can’t go below zero).
Loss Potential	Limited to the premium paid for the option.	Limited to the premium paid for the option.
Break-even Point	Strike price plus premium paid.	Strike price minus premium paid.
Use Cases	Speculation on rising prices, hedging short positions.	Speculation on falling prices, hedging long positions.
Intrinsic Value	Current asset price minus strike price (if positive).	Strike price minus current asset price (if positive).
Time Decay	Option value decreases as expiration approaches.	Option value decreases as expiration approaches.
Risk Profile	Limited risk (premium paid), unlimited reward.	Limited risk (premium paid), limited reward.
Market Sentiment	Bullish sentiment on the underlying asset.	Bearish sentiment on the underlying asset.
Example	Buying a call on stock ABC at strike price ₹100, expecting price to rise above ₹100.	Buying a put on stock ABC at strike price ₹100, expecting price to fall below ₹100.
Exercise Style	Can be American (anytime before expiry) or European (only at expiry).	Can be American (anytime before expiry) or European (only at expiry).
Leverage	Allows controlling larger positions with smaller capital.	Allows controlling larger positions with smaller capital.
Impact of Volatility	Higher volatility increases call option premium.	Higher volatility increases put option premium.
Settlement	Physical delivery or cash settlement based on contract terms.	Physical delivery or cash settlement based on contract terms.
Popularity	More commonly used for bullish strategies.	More commonly used for bearish strategies.
Hedging	Used to hedge short stock positions or limit losses.	Used to hedge long stock positions or limit losses.
Cost	Requires paying a premium upfront.	Requires paying a premium upfront.
Expiration	Options have a fixed expiration date.	Options have a fixed expiration date.
Strategy Examples	Covered call, call spreads, long call.	Protective put, put spreads, long put.