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Call Option
Definition
A Call Option is the Opposite of a put option in that it benefits when the underlying security goes up in value. As we have studied before, options buying represents an opportunity for an investor to gain other income through premiums earned or they represent an opportunity to speculate on the movement in the price of an underlying security. A call option contract gives the owner the right (but not the obligation) to buy a specified amount of an underlying security, typically 100 shares for a stock, at a specified price until the contract's expiration date.
Using the term Call Option :
Options are a way to get more bang for your buck because they implicitly contain leverage. They allow you to put up a small amount of money to control a large amount of shares. Even though you do not own the shares, your returns are based on the movement of a large block of shares. Each contract you buy represents 100 shares of the underlying stock in most cases. So to calculate the cost of an option with a certain expiration date, multiply the premium quoted by 100 and that will be the cost of one contract, plus any commissions.
Pay Special Attention To :
The options market is for professionals primarily. Please ensure that you feel well educated before trying to trade in the options market itelf. Otherwise, find a competent professional to help to trade this market. Either way, it is an efficient market and it is often difficult to make money.
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Related terms
Derivative , Options , Put Option
