Explain the concept of call options and put options.

Call options and put options are financial derivatives that give the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specified period of time.

A call option is a contract that gives the holder the right to buy the underlying asset at a predetermined price, known as the strike price, on or before the expiration date. The buyer of a call option expects the price of the underlying asset to increase in the future. By purchasing a call option, the buyer has the opportunity to profit from the price appreciation of the asset without actually owning it. If the price of the underlying asset exceeds the strike price before the expiration date, the call option holder can exercise the option and buy the asset at the lower strike price, subsequently selling it at the higher market price to make a profit. However, if the price of the underlying asset does not exceed the strike price, the call option expires worthless, and the buyer loses the premium paid for the option.

On the other hand, a put option is a contract that gives the holder the right to sell the underlying asset at a predetermined price, the strike price, on or before the expiration date. The buyer of a put option expects the price of the underlying asset to decrease in the future. By purchasing a put option, the buyer has the opportunity to profit from the price decline of the asset without actually owning it. If the price of the underlying asset falls below the strike price before the expiration date, the put option holder can exercise the option and sell the asset at the higher strike price, subsequently buying it back at the lower market price to make a profit. However, if the price of the underlying asset does not fall below the strike price, the put option expires worthless, and the buyer loses the premium paid for the option.

In summary, call options provide the right to buy an asset at a predetermined price, while put options provide the right to sell an asset at a predetermined price. Both options offer investors the opportunity to profit from price movements in the underlying asset without actually owning it, but they also come with the risk of losing the premium paid for the option if the anticipated price movement does not occur.