What is call option and put option?

An Option is a contract that gives its buyers the right to buy or sell the underlying asset on or before a stated date, at a stated price, for a premium. The party taking a long position i.e. buying the option is called buyer or holder of the option and the party taking a short position i.e. selling the option is called the seller or writer of the option. 

The option buyer has the right but no obligation with regards to buying or selling the underlying asset, while the option writer has the obligation to its commitment in the contract. Options are of mainly two types i.e. Call Option that gives the buyer a right to buy the underlying asset and Put Option that gives the buyer a right to sell the underlying asset. 

The various scenarios can be: 

Buy a Call option - This gives the buyer of the option, the right to buy a security on a specified date in the future at the specified price (strike price). The buyer of the option exercises his right if on the specified date the strike price is lower than the market price (spot price) of the security. 

Buy a Put option - This gives the buyer of the option, the right to sell a security on a specified date in the future at the strike price. The buyer exercises the right if on the specified date the strike price is higher than the spot price of the security. 

Sell a Call option - This obligates the seller of the option to sell a security on a specified date in the future at the strike price if the buyer of the option exercises the right to transact. The buyer exercises the right if on the specified date; the strike price is lower than the spot price of the security. 

Sell a Put option - This obligates the seller of the option to buy a security on a specified date in the future at the strike price if the buyer of the option exercises the right to transact. The buyer exercises the right if on the specified date; the strike price is higher than the spot price of the security.