Glossary Call Option

Call Option

Definition of Call Option

A call option is a type of derivative contract that gives the right but not the obligation to buy an underlying asset like shares, commodities, currencies, and others at a pre-agreed price and date.

There are three components to a call option:

Premium: the price paid to buy a call option

Strike price: the pre-agreed price of the underlying asset

Expiration date: the day after which the option contract will be worthless

Back to glossary

Related Terms

Candlesticks

Candlesticks are technical charts used in trading to understand price movements.

Read Now

CANSLIM

CANSLIM is an acronym for a seven-step strategy to pick growth stocks by combining fundamental and technical analysis.

Read Now

Capital Asset Pricing Model

Capital Asset Pricing Model or CAPM is used to determine the expected return one can earn on an asset by evaluating the associated risks and how markets price the asset.

Read Now

Capital Expenditure

Capital expenditure or CapEx is the amount of money a company spends on maintaining, upgrading, or buying new assets like machinery, equipment, property, and others.

Read Now

Capital Gain Or Loss

A capital gain is a profit that an investor or trader earns by selling an asset while a capital loss is the money a trader or investor loses after selling an asset. Capital gains are taxed while capital losses can be used to offset gains.

Read Now

Capital Gains

A capital gain is a profit an investor or trader earns by selling shares, commodities, futures, options, currencies, and other assets. More literally, a profit is a gain on the capital that’s invested - hence the term capital gains.

Read Now