Call Option
The right to buy 100 shares at a set strike price before expiration.
What is Call Option?
A contract giving the buyer the right, not the obligation, to purchase the underlying at the strike price. The buyer pays a premium and risks only that premium; the seller collects it and takes on the obligation to deliver.
Call Option: a worked example
A $55 call costing $2 ($200 per contract) on a $50 stock breaks even at $57 by expiration.
What is the difference between Call Option and Put Option?
Call = right to buy, bullish for the buyer. Put = right to sell, bearish for the buyer.
Often confused with Put Option - see Call Option vs Put Option side by side.
More terms in Securities & Instruments
Common Stock
An ownership share in a company, with voting rights and last claim on assets.
Preferred Stock
Equity with a fixed dividend and priority over common, usually without votes.
Bond
A loan to an issuer that pays interest and returns principal at maturity.
Coupon Rate
The bond's stated annual interest as a percentage of par.
Yield to Maturity (YTM)
The total annualized return if you buy today and hold to maturity.
Par Value (Face Value)
The principal repaid at maturity, conventionally $1,000 per bond.
Duration
A bond's price sensitivity to a 1% change in interest rates.
Credit Rating
An agency's assessment of an issuer's likelihood of default.