Call Option

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DEFINITION of 'Call Option'

An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.

INVESTOPEDIA EXPLAINS 'Call Option'

It may help you to remember that a call option gives you the right to "call in" (buy) an asset. You profit on a call when the underlying asset increases in price.

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  2. What is the difference between a long position and a call option?

    A long position in an asset signifies that the investor owns the asset. On the other hand, when an investor buys a call option, ... Read Full Answer >>
  3. What is the difference between a covered call and a regular call?

    A call option is a contract that gives the buyer, or holder, a right to buy an asset at a predetermined price by or on a ... Read Full Answer >>
  4. What is the maximum I can lose if I make a covered call?

    A covered call is an option strategy you can use to reduce risk on your long position in an asset by writing call options ... Read Full Answer >>
  5. What is the difference between "right" and "obligation" on a call option?

    An option is a financial instrument whose value is derived from an underlying asset. A call option is an agreement that gives ... Read Full Answer >>
  6. How can I profit with call options?

    A call option is a contract that gives the buyer the right to buy a specified quantity of an underlying asset at a predetermined ... Read Full Answer >>
  7. What options strategies are best suited for investing in the financial services sector?

    The best options strategies for investing in the financial services sector exploit the sector's higher-than-average volatility. ... Read Full Answer >>
  8. How are call options priced?

    A call option provides an investor the right to purchase a stock, bond or other underlying security at a specific purchase ... Read Full Answer >>
  9. Is going long considered to be less risky than going short?

    Two positions an investor can be in are long or short. A long position is created when an investor buys a security, such ... Read Full Answer >>
  10. What options strategies are best suited for investing in the metals and mining sector?

    In the past, the only way an investor could gain exposure to the precious metals market was through a commodities brokerage ... Read Full Answer >>
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  12. What role does intrinsic value play in call options?

    Intrinsic value is one of two components – along with time value – traditionally used to explain the pricing of financial ... Read Full Answer >>
  13. How does a bond's coupon interest rate affect its price?

    All bonds have a coupon interest rate, sometimes referred to as coupon rate or simply coupon, that is the fixed annual interest ... Read Full Answer >>
  14. What does it mean when a bond has a put option?

    A put option on a bond is a provision that allows the holder of the bond the right to force the issuer to pay back the principal ... Read Full Answer >>
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    The incorporation of options into all types of investment strategies has quickly grown in popularity among individual investors. ... Read Full Answer >>
  16. Why are corporations so concerned about their stock price?

    When the share price of a company is high or increasing, generally corporations, or more specifically their management teams, ... Read Full Answer >>
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    A put option is a contract that gives the option holder the right, but not obligation, to sell a set amount of shares (1 ... Read Full Answer >>
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