Call On A Call

Dictionary Says

Definition of 'Call On A Call'


A type of compound option in which the investor has the right to exercise a call on the underlying asset, which is an option. An investor who owns a call on a call option has until the expiration date to exercise the compound option. If exercised, the investor will receive the underlying call option, which will have a set expiration date and a new exercise price. If the underlying option is exercised, the investor receives the underlying assets.

Investopedia Says

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.

comments powered by Disqus
Hot Definitions
  1. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  2. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  3. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
  4. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
  5. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public.
  6. Maritime Law

    A body of laws, conventions and treaties that governs international private business or other matters involving ships, shipping or crimes occurring on open water.
Trading Center