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home / study / business / finance / finance questions and answers / explain the difference between a call option and a put option. explain the difference between ... Your question has been answered Let us know if you got a helpful answer. Rate this answer Question: Explain the difference between a call option and a put option. Explain the difference between an ... Explain the difference between a call option and a put option. Explain the difference between an American option and European option. Find the value of a call option using the binomial option pricing formula for single period when given the following information: you have an option with 6 months until expiration, the payoff in the up scenario is $12, and the payoff in the down scenario is $0, the risk-free rate is 5%, the weight for the up scenario is 1.1, and the weight for the down scenario is 0.7

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A Call Option gives the buyer the right but not the obligation to buy the underlying security at the exercise price. A Put Option gives the buyer the right but not the obligation to sell the underlying security at the exercise price.

The key difference between American and European options relates to when theoptions can be exercised: A European option may be exercised only at the expiration date of the option, i.e. at a single pre-defined point in time. An American option on the other hand may be exercised at any time before the expiration date.

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