What is Call Option?
A contract giving the holder the right to buy a stock at a specified price before expiration.
📖 Complete Definition
A call option is a financial contract that gives the buyer the right, but not the obligation, to purchase an underlying asset (typically 100 shares of stock) at a predetermined strike price before or on the expiration date. Call buyers profit when the underlying stock rises above the strike price plus the premium paid. Sellers (writers) of call options collect premium but are obligated to sell shares if assigned.
💡 Examples
- →Buying an AAPL $180 call expiring in 30 days gives you the right to buy 100 shares of Apple at $180
- →If AAPL rises to $200, your call is worth at least $20 per share ($2,000 total)
❓ Frequently Asked Questions
When should I buy a call option?
Buy call options when you expect the underlying stock to rise significantly before expiration. Calls provide leveraged upside exposure with limited downside risk (premium paid).
What happens when a call option expires?
If the stock price is above the strike price (in-the-money), the option may be exercised or sold. If below the strike (out-of-the-money), the option expires worthless.
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