call option

A call option is a financial contract that gives the buyer the right, but not the obligation, to purchase a specific amount of an underlying asset—such as stocks—at a predetermined price (called the strike price) within a set period. Investors buy call options if they expect the asset’s price will rise, allowing them to buy at the lower strike price and potentially profit from the difference. If the asset’s price doesn’t increase beyond the strike price, the buyer can choose not to exercise the option, limiting their loss to the cost of the option itself (the premium).