A "call option" (or a “call”) is an option contract that gives the holder the right, but not the obligation, to buy 100 shares of an underlying security within a certain time frame, at a certain price (the “strike price”). The concept is like leasing a particular car. You have the right to buy this car at the end of the lease term, but instead of paying the whole premium up front, as in buying an option, you pay a premium (in monthly installments) to the financing company. Your lease expires at the end of the term, and just like an option, you may exercise it, (buy the car or buy the stock), or simply let it expire (give back the car or do nothing on the options side.) It is that simple.

A "put option" (or a “put”) is the opposite of a call. A put gives you the right, but not the obligation, to sell 100 shares of an underlying security within a certain time frame, at a certain price (the “strike price”). If the security falls below the strike price you are guaranteed a sale at the predetermined strike price.

Obviously, the less time that remains until an option expires, the lower the premium for that option. For instance, the premium for an option that expires in a month would be lower than the premium for an option that expires in two months. Theoretically, if you wanted downside protection (by buying a put) for an infinite period of time, the premium of such a put option would equal the price of the security itself.