Definition
Puts and calls are a paired set of option contracts used in securities and commodities trading, each granting the holder a contractual privilege — but not an obligation — to sell or buy an asset at a specified price within a specified time.
A PUT is the right to sell (or, in historical usage, the privilege of delivering or not delivering) a given quantity of stock, grain, or other commodity at a set price. The holder decides whether to exercise the option based on market movement.
A CALL is the right to buy (or, in historical usage, the privilege of calling or demanding or not demanding delivery of) the same. Again, exercise is at the holder's election.
Together, puts and calls are the two fundamental categories of option contracts. Modern derivatives markets have elaborated extensively on these basics — standardized exchange-traded options, combinations such as straddles and spreads, and regulated futures options — but the underlying structure maps directly onto the definitions found in nineteenth-century legal sources.
Common Language
Modern common usage (Wiktionary): A "put" in financial contexts is an option to sell a security at a fixed price; a "call" is an option to buy. Both are widely understood in business journalism and personal investing contexts.
Historical common usage (Webster's 1913): Webster's 1913 does not separately define "put" and "call" as financial instruments; the financial sense was emerging trade jargon at the time of that dictionary's compilation, more at home in commodity pits and brokerage offices than in general dictionaries.
The gap worth noting: ordinary modern usage treats puts and calls as instruments of sophisticated investing or speculation. In historical legal sources — and in the nineteenth-century cases that generated those definitions — puts and calls were frequently at issue precisely because they were contested as wagering contracts or as illegal options. Whether the transaction was a genuine commercial hedge or a naked speculation on price movement was the central legal question, not merely a policy concern. That enforcement context shapes virtually everything the historical legal sources say about these terms.
Common Confusion
Puts and calls are sometimes conflated with futures contracts. A futures contract obligates both parties to perform at the contract price on the delivery date. A put or call, by contrast, creates a one-sided privilege: the option holder may exercise or walk away; the counterparty (the option writer) must perform if the holder elects to exercise. This distinction — obligation versus privilege — is the operative legal difference and was expressly captured in the historical definitions ("a privilege of delivering or not delivering").
Puts and calls are also sometimes confused with the broader term option, which is the genus of which puts and calls are species. All puts and calls are options; not all options are neatly classifiable as a simple put or call.
Recognized Forms
/SUBTYPES
Put option: Grants the holder the right to sell the underlying asset at the strike price before or at expiration.
Call option: Grants the holder the right to buy the underlying asset at the strike price before or at expiration.
Straddle: A combination contract purchasing both a put and a call on the same asset at the same strike price — historically recognized and discussed in nineteenth-century commodity litigation, and relevant in both the trading and the tax contexts today.
Spread: A strategy involving simultaneous purchase and sale of puts or calls at different strike prices or expiration dates.
Exchange-traded options: Standardized puts and calls traded on regulated exchanges (e.g., the Chicago Board Options Exchange after 1973), governed by SEC and CFTC regulatory frameworks entirely absent from the historical legal literature.
Why It Matters in Research
The central research trap is the wagering contract problem. When historical legal dictionaries and the cases they cite were written, puts and calls occupied contested legal territory. Many nineteenth-century jurisdictions treated option contracts on grain and stock as gambling devices or bucket-shop transactions, unenforceable as against public policy. The Illinois case cited in both editions of Black's — Pixley v. Boynton, 79 Ill. 351 — arose in exactly that enforcement context. A researcher reading historical sources on puts and calls must therefore distinguish between: (1) sources discussing what a put or call is as a matter of commercial definition, and (2) sources discussing whether a given put or call was enforceable at all. The definitional language in the historical dictionaries was drawn from cases primarily concerned with enforceability, not taxonomy.
Terminology has also shifted. What the nineteenth-century sources call a "privilege of delivering or not delivering" is now simply called a put option. Modern regulatory and transactional drafting uses put and call as standalone nouns, without the privilege framing. Researchers tracing option contract law from historical sources into modern securities regulation must track this linguistic evolution carefully or risk misreading older authority.
Jurisdictional variation matters here both historically and currently. State bucket-shop laws and anti-gambling statutes affected enforceability of options contracts unevenly across jurisdictions through the early twentieth century. Modern federal preemption under the Commodity Exchange Act and SEC regulation has substantially nationalized the framework, but state law nuances in contract enforceability can still appear in litigation over bespoke OTC options.
Corpus connections: Researchers following puts and calls into the Law Mind corpus will find the most productive connections under contract enforceability (wagering and gambling), securities regulation, and commodities law — rather than in the family law encyclopedia entries surfaced by search proximity to the word "putative," which share no substantive relationship to this term.
Historical Dictionary Support
The historical sources are notably consistent on the core definitions, which is itself informative: all four source dictionaries converge on the privilege framing, and Bouvier's, Black's First, and Black's Second all cite back to the same Illinois authority (79 Ill. 351/353), suggesting that a single case effectively supplied the working legal definition for the era.
Rapalje & Lawrence presents a corruption in the transcribed entry — the "put" definition appears to have been merged mid-sentence with unrelated material on "putting in fear" and "putting in suit," reflecting either a digitization error or a damaged source page. Researchers should not rely on Rapalje & Lawrence for this term without consulting the original print edition.
What the historical sources miss: they have nothing to say about exchange-traded standardized options, options pricing theory, the regulatory apparatus that now governs listed derivatives, or the tax treatment of puts and calls under modern income tax law. For any research question touching on post-1933 securities regulation or post-1974 listed options markets, the historical dictionaries are definitional starting points only.
Jurisdictional Note
Modern puts and calls on securities and listed commodities are governed primarily by federal law — the Securities Exchange Act of 1934, the Commodity Exchange Act, and the regulations of the SEC and CFTC. State law continues to govern enforceability of purely private, over-the-counter option contracts in some contexts, particularly where federal jurisdiction is disputed or where state contract and fraud claims are asserted alongside federal claims.