What are Options? They are a contract that is sold to one trader, the option writer to another trader, the option holder. The contract gives the buyer the right but not the obligation to buy sell the security on the agreed price; the strike price. All contracts (options) will expire on a certain date.
Calls - gives the right to buy.
Puts - gives the right to sell.
In Tuesday's ratios post, I mentioned the struggle between Gamma and Theta that builds into expiration. The events of the past few days illustrate well the perils of holding short gamma positions too long. This is an instance where the extra rope lent to the ratio spread definitely turned into a noose. It also shows why Gamma is an option sellers most treacherous foe.