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CFA Level I Derivatives
#1

Hey everyone,

I have a hard time remembering the difference between short call and put, long call and put. Any tips that you might be using to remember them effectively.

Regards,

David.

#2

divide it into 2 words

1st word describes what the investor does with the option at the beginning

  • long - buys

  • short - sells

And when he bought/sold the option - then the 2nd word describes the option

  • call - right to buy underlying asset

  • put - right to sell underlying asset

#3

One additional remark: Try to visualize the 4 options in a diagram and learn the graphs by heart. If you know the graphs you will be able to solve most of the questions in the exam (e.g. through payoff diagrams).

Best, Oscar