Call option

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What's a Call Option?

A call options grant an investor the right to buy an underlying asset at a predetermined price (strike price) by a predetermined date (Expiry).

The investor who bought a call option has the right buy share of the underlying asset at the strike price until the date of expiry.

The seller of the call option (The call "writer") is obligated to the buyer. If the investor decides to exercise the option and buy the shares, the call writer is bound to sell his share to the call buyer at the predetermined strike price

For example, let's say investor bought a call option on Google (Nasdaq:GOOG) with a strike price of $450 with expiry in one month. The call buyer has the right to exercise that option, paying $450 per share and receiving the share at the price agreed at the time of purchase. The writer of the call option is obliged to deliver those shares at the price of $450.


See Also: What is a put option ?

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