Call Option

Posted in Finance, Accounting and Economics Terms, Total Reads: 2047

Definition: Call Option

Call Option is an instrument wherein the purchaser of the option has the right to buy a security like a commodity or a bond at a predetermined price within a specified interval of time.

The important point here is that the purchaser or the buyer of the option has the right and not the obligation to buy the underlying security.

So, if the prices rise in the future, the buyer will gain by buying the security at a lower price and selling it at a higher one in the market.

The opposite of a call option is the put option where the purchaser has the right to sell an underlying security at a predetermined price.

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