Put On A Call

02/02/2011 20:22

One of the four types of compound options, this is a put option on an underlying call option. The buyer of a put on a call has the right but not the obligation to sell the underlying call option on the expiration date. This type of option is used when leverage is desired, and the trader is bearish on the underlying asset. The value of a put on a call changes in inverse proportion to the price of the underlying asset, i.e. it decreases as the asset price increases, and increases as the asset price decreases. Also known as a split-fee option.