It's called a "collar" --- where the person buys one position and sells another... Options trading isn't something for Investing 102 because it's really complex. There are many ways to trade "OPTIONS". Maybe that's why my boat was called "Options"?? I wanted to call the dingy "Puts and Calls" - in other words taking one to shore or picking them up? LOL
So with Options trades -- you can do one of two BASIC things (there's many ways to trade options):
Investopedia explains 'Put'
When an investor purchases a put, he or she expects the underlying asset will decline in price. The investor will then profit by either selling the put options at a profit, or by exercising the option. If an investor writes a put contract, he or she is estimating the stock will not decline below the exercise price, and will not fall significantly below the exercise price.
Consider if an investor purchased one put option contract for 100 shares of ABC Co. for $1, or $100 ($1*100). The exercise price of the shares is $10 and the current ABC share price is $12. This contract has given the investor the right, but not the obligation, to sell shares of ABC at $10.
If ABC shares drop to $8, the investor's put option is in-the-money and he can close his option position by selling the contract on the open market. On the other hand, he can purchase 100 shares of ABC at the existing market price of $8, then exercise his contract to sell the shares for $10. Excluding commissions, the total profit for this position would be $100 [100*($10 - $8 - $1)]. If the investor already owned 100 shares of ABC, this is called a "married put" position and serves as a hedge against a decline in share price.
Read more:
http://www.investopedia.com/terms/p/...#ixzz2Bm20BkPM
Definition of 'Call'
1. The period of time between the opening and closing of some future markets wherein the prices are established through an auction process.
2. An option contract giving the owner the right (but not the obligation) to buy a specified amount of an underlying security at a specified price within a specified time.
Investopedia explains 'Call'
1. In some exchanges, the call period is an important time in which to match and execute a large number of orders before opening and closing.
2. A call becomes more valuable as the price of the underlying asset (stock) appreciates.
Read more:
http://www.investopedia.com/terms/c/...#ixzz2Bm2JfpdG