Call of More Option

Call options

A call option is a financial contract between two parties, consisting of a buyer and a seller, where the buyer obtains the right to buy an agreed quantity of a particular commodity or financial instrument from the seller, at a certain price, within a certain period of time.

In order to enjoy such a right, the buyer has to pay a certain fee to the seller, following which, the seller is obligated to sell the agreed quantity of commodity or financial instrument to the buyer at the set price, irrespective of its value at the time of calling, if the buyer decides to buy it within the set time period, for which a fee has been already paid.

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The seller is also known as the writer, while the price which is set beforehand is called the strike price. The time period for exercising the call option is called the expiration date and the fee that is already paid, is called the price of the call or the premium.

The call option expires or is rendered useless, when the buyer has not exercised the option up to the expiration date, or when the price of the commodity or financial instrument has gone below the strike price.

Call options can be purchased on many financial instruments other than stock in a corporation.

Edited and Updated 30th January 2014

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