Investing Basics

What Is a Call Option?

A call option is a contract that gives its buyer the right, but not the obligation, to buy an asset — such as 100 shares of a stock — at a set price (the strike price) on or before an expiration date. The buyer pays a premium for this right and benefits if the asset’s price rises above the strike.

Example

A call with a strike of 50, bought for a premium of 2 per share, breaks even at 52 at expiration; below 50 the option expires worthless and the premium is lost.

Buyer vs. Seller

The seller (writer) receives the premium and must sell at the strike price if the option is exercised.

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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.