Options & Derivatives
Call Option
Buying a call is a bet that a stock will rise. The strike price locks in the purchase price, and the buyer pays a premium for the right to exercise. If the stock climbs above the strike, the call gains value.
Calls offer leverage: a small premium can control a large position, so a modest move in the underlying can produce an outsized percentage gain, or a total loss if the option expires worthless.
Investors use calls to speculate on upside, to gain exposure with limited capital, or to generate income by selling calls against stock they already own.
Example
If you buy a call with a $50 strike and the stock rises to $60, you can buy at $50 and capture the difference.
Related terms
Call Option — FAQ
What is Call Option?
A call option is a contract giving the buyer the right, but not the obligation, to buy an asset at a set price before a specified expiration date.
Can you give an example of Call Option?
If you buy a call with a $50 strike and the stock rises to $60, you can buy at $50 and capture the difference.
Understanding creates conviction.
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