A call option is an agreement that gives the option buyer the right to buy the underlying asset at a specified price within a specific time period.
| Term of the Day | Words to Know | | | | Call Option | Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other asset or instrument at a specified price within a specific time period. The stock, bond, or commodity is called the underlying asset. A call buyer profits when the underlying asset increases in price.
A call option may be contrasted with a put, which gives the holder the right to sell the underlying asset at a specified price on or before expiration. | Read More » | SPONSORED BY SMARTASSET | Financial Advisor Mistakes to Avoid | Choosing a financial advisor is a major decision that can determine your financial trajectory for years to come. SmartAsset offers tips on common mistakes to avoid. | Learn More » | | Strike Price | Strike price is the price at which a derivative contract can be bought or sold (exercised). | Read More » | | Put Option | A put option gives the owner the right to sell a specified amount of an underlying security at a specified price before the option expires. | Read More » | | Premium | Premium is the total cost of an option or the difference between the higher price paid for a fixed-income security and the security's face amount at issue. | Read More » | | | | | CONNECT WITH INVESTOPEDIA | | | | | |
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