A call option is an agreement that gives the option buyer the right to buy the underlying asset at a specified price within a specific time period.
 | | Term of the Day | Words to Know | | |  | | Call Option | Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other asset or instrument at a specified price within a specific time period. The stock, bond, or commodity is called the underlying asset. A call buyer profits when the underlying asset increases in price.
A call option may be contrasted with a put, which gives the holder the right to sell the underlying asset at a specified price on or before expiration. | | Read More » | | SPONSORED BY SMARTASSET | | Financial Advisor Mistakes to Avoid | | Choosing a financial advisor is a major decision that can determine your financial trajectory for years to come. SmartAsset offers tips on common mistakes to avoid. | | Learn More » | | | Strike Price | | Strike price is the price at which a derivative contract can be bought or sold (exercised). | | Read More » | | | Put Option | | A put option gives the owner the right to sell a specified amount of an underlying security at a specified price before the option expires. | | Read More » | | | Premium | | Premium is the total cost of an option or the difference between the higher price paid for a fixed-income security and the security's face amount at issue. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
