What Is Call Option? Meaning & Example
Definition
A call option gives the buyer the right to buy an asset at the strike price before expiration. Buyers profit if the price rises enough above the strike to cover the premium paid.
Related terms
A put option gives the buyer the right to sell an asset at the strike price before expiration. Puts can be used to profit from declines or to protect existing holdings.
Strike PriceThe strike price is the set price at which an option holder can buy (call) or sell (put) the underlying asset. It determines whether an option has intrinsic value.
Option PremiumThe premium is the price paid by an option buyer to the seller. It reflects intrinsic value, time remaining and expected volatility.
What is Call Option?
A call option gives the buyer the right to buy an asset at the strike price before expiration. Buyers profit if the price rises enough above the strike to cover the premium paid.
Can you give an example of Call Option?
Buying a $50 call for $2 breaks even at $52 at expiration, ignoring fees.