call option
(finance) a financial derivative that ent-tles the owner to buy a fixed amount of x for a fixed price (the strike price) by a specific date in the future. if this is an equity derivative, x is referred to as the underlying stock.
a call option allows one to reap profits from an increase in price of a traded item without actually buying the -sset itself. since it is an option, one is not compelled to exercise it if it not advantageous to do so; however, the party that initially issued the option (i.e., the one who “wrote” the option) is legally obligated to honor the option.
when the strike price of a call option is more than the current market price of the -sset (i.e., its “spot price”), then it has no intrinsic value and is “out of the money.”
buying a call option is one way to take a long position on the underlying -sset.
writing a call is a way to take a short position.
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