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Call Option

Options

A call option gives its holder the right to buy a stock at the strike price until expiration.

Its value rises as the stock climbs above the strike; if the stock is below the strike at expiration it expires worthless, and the buyer's loss is limited to the premium paid. The breakeven point is the strike plus the premium.

Example

You buy a $100 strike call for a $3 premium ($300 per contract). If the stock is at $110 at expiration, the call is worth $10, a net gain of $7 per share or $700 per contract. If the stock stays below $100, you lose the full $300.

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More in the Guide

Options: Calls, Puts and the Anatomy of a PremiumA way to trade direction without owning the stock — and why the clock inside the premium always runs against the buyer.