I have just started studying finance and stochastic calculus so apologies if this question is too naive.
I was first introduced to stocks and bonds as risk and riskless investment assets. Then a new idea is introduced, that of a call option. At first sight, this seems like a new independent investment product, and that you wouldn't be able to create such a portfolio using stocks and bonds only.
But now to calculate the price of this call option, we assume no-arbitrage in our model (Binomial and Black Scholes are the two I have studied so far) and hedge using the stocks and bonds. In other words, just using stocks and bonds we create a portfolio that is the same as a call option. This was surprising to me in a nice way.
But at the same time, it has left me confused. If I could achieve such a portfolio using stocks/bonds then why are call options studied separately?
In fact, it seems to me like introducing call options as an additional investment asset class adds to your "risk dimension". In the sense that, when someone sells a call option, they need to hedge against this risk. So why should someone sell a call option, instead of shorting some stocks or bonds? I agree that options risk will still exist implicitly, but introducing them as a separate asset class just adds to the risk dimension that I would need to hedge.
Also, are there any other merits of options that stocks/bonds alone cannot provide, perhaps in the real world?