What is a Call Option?
This is why you need to know about the call:
-> This option contract does not mean an obligation to buy the underlying security at a particular price and time.
-> While the specified price is called the strike price, the specified time when the sale is made is expiration or maturity.
-> The purchase fee is the premium.
-> One can combine call options with combination strategies.
How Does it Work?As the stock price becomes more than the strike price at expiration, it is said that the call options are “in the money”. Then, the option buyer can:
-> put up cash and purchase the stock at the strike price. -> sell the option at the market value to another buyer before the same gets expired.
In case the stock price falls down the strike price, then the call is termed “out of the money”. In that case, the option is worthless. The sellers can keep any premium the option fetched them.