A call option is the right to buy the security, while a put option is the right to sell the security. For example, a stock option normally represents 100 shares of the underlying stock. The beauty of options trading is that it allows you to maximize your potential reward while minimizing your risk. Options allow you to leverage your investment more than other investment tools. A small investment in options gives you as much potential for profit as a much larger investment in the underlying asset itself.
Options are more flexible, too.
You can buy and sell them in various combinations to create exactly the risk profile you desire. You can use options to take advantage of any market condition - not just rising or falling markets. Option trades can also be constructed that give you a much higher probability of profit than buying or selling the underlying asset. Much like stocks, options can be used to take a position on the market in an effort to capitalize on an upward or downward market move. However, options give you easier directional flexibility with less capital required.