Investopedia explains 'Call On A Call'
A compound option is an option in which the underlying asset is itself an option - so it is an option on an option. Before expiration, the value of the option depends on the value of the asset the underlying option represents. At expiration, the option can be priced at expiration using the Metron model. This means that the value of the call on a call option (with the underlying good being a stock) increases as the stock's price increases.
An investor will exercise the call on a call option if, at the expiration date, the price of the underlying call option is worth more than the exercise price of the option.
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