What Is Call Option in Stock Market?
What Is Call Option?
A call is an option contract between two parties wherein one party has the right to buy but not the obligation to a specified amount of an underlying asset which can be stocks, commodities, or currencies at a specified price within a limited time.
Words Use in call option-
- Contract – A contract between the buyer and seller of the Option contract.
- Strike Price – A strike Price is a Fixed price at which the buyer of the option can buy.
- Premium – The price of an option contract is determined in the competitive marketplace, in which the option buyer pays the option writer for the rights conveyed by the option contract. It’s a per-share amount you pay, similar to an insurance premium.
- Expiration Date – This is the last day of the Options contract. If you don’t buy the stock, the option expires, and you will lose the Premium you paid.
- In The Money – When the market value is higher than the strike price of call.
- Out of The Money – When the Current Price of the Call is Lower than the Strike Price.
A Long Call
A Long Call Option is Your Standard Call option in which the buyer has the right to buy stock, not the obligation. A Long Call is a Purchased call option with an unrestricted right to Buy Shares. It focuses on the underlying asset’s market price increases beyond the strike price before the expiration date.
A Short Call
A short call is an options strategy when the investor believes that the asset price underlying the option will Decrease in the Future. Short Calls have Limited Profit Potential and the Risk of Unlimited Loss.
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