Equity options
When trading equity options, a call option provides the holder with the right, but not the obligation, to buy a specified parcel of shares at a predetermined exercise price on or before a specified expiry date. A put option operates in a similar manner but grants the right to sell the underlying shares rather than purchase them.
Index options
Trading index options involves cash settlement rather than the delivery of shares. A payment is made if the underlying index reaches the exercise level at the expiry date. A call option results in a payment where the index closes above the exercise level, while a put option results in a payment where the index closes below that level.