For example: United States Steel Common is selling at $40 per share; A, the seller, offers a call on 100 shares at 43, good for ten days, at a price of say, $100. B, the purchaser, pays the $100 and receives a contract from A as specified above. Now suppose that at any time before the expiration of the period named, Steel Common advances to 50. B can call for the delivery of 100 shares of Steel at 43, and by selling it, reaps a profit of $700, less the cost of the privilege, ($100), and the brokerage. Used as a protective measure on short sales, the result would be the same, as $700 would have been saved. That is to say, if A is short of Steel at 40 and it advances to 50, his call has acted as insurance against any loss over and above the $300 represented by the rise from 40 to 43. The “put” is exactly the reverse of the “call,” and is insurance against a decline; or, in other words, an agreement to receive shares at a specified price on or before a certain date. Using the same illustration as before, let us assume that the price of Steel Common is 40, and that A, the seller, offers a put at 37, good for 10 days, at a price of $100. B, the buyer, is now insured against any loss which may accrue through a decline below 37 in the ensuing ten days. If he is long of the stock and it declines to 30, he may deliver his shares to A at 37, or if he has purchased the “put” as a speculation, he may buy 100 shares in the market at 30 and deliver to B at 37, netting a profit of $700, less the price paid for “put” and brokerage. One of the favorite methods of trading in privileges is to buy or sell against them when the price named is reached. For example, say B holds a ten day “put” on Steel Common at 37, and the market for the stock declines to 36 in five days. He may now buy 100 shares at 36 on the theory that he has regained his original outlay of $100 and has a possibility of profit through market action in the remaining five days, while there is no possibility of loss. If the market advances to, say 38, he may sell the one hundred shares purchased, and on another decline to 37 or 36 may again purchase, repeating the operation indefinitely during the life of his put. The “Call” is, of course, made the basis of short sales on an exact reversal of this process. This fashionable form of exercising privileges is facilitated by the fact that “puts and calls” issued by members of the New York Stock Exchange, are generally accepted by brokers as “margins”; B having paid A $100 for a “put,” as illustrated above, could, if Steel declined to 37 or below that figure, buy 100 Steel and give his broker the privilege issued by A, in lieu of a marginal deposit. The broker is satisfied, as he gains a commission, and in the event of a further decline in the price of Steel can call on A to receive the stock at 37 when the option expires.