Options (Call / Put)

Options buy and sell "the right to buy or sell a stock at a set price." Being a right, not an obligation, you exercise it if favorable and discard it if not (losing what you paid for it).

There are two kinds. A call is "the right to buy at a set price," so it gains when the stock rises; a put is "the right to sell at a set price," so it gains when it falls. So calls are commonly used to bet on a rise, puts on a fall.

Options are a lever (leverage) that creates a big effect with little money, so a right call earns big but a wrong one can lose the whole amount paid. It is that volatile and risky a tool.

Institutions use options more as "insurance" than speculation. Buying puts in case a held stock falls can offset part of the downside loss (a hedge).

Buying a put does not unconditionally mean "betting on a fall." It may be insurance (a hedge) to protect a held stock, so do not declare direction without context. (That is why our 13F screen also distinguishes PUT/CALL and shows the underlying share count, to reduce the misreading of a downside bet.)

Marketwide, the ratio of puts to calls (the put-call ratio) is sometimes used as a reference for gauging sentiment — lots of puts is read as high fear, for instance.