CALL OPTION Meaning and
Definition
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A call option is a financial contract that gives the buyer the right, but not the obligation, to purchase a specific asset, such as stocks, bonds, commodities, or currencies, at a predetermined price, known as the strike price, within a specified period of time. In simpler terms, it grants the holder the ability to "call" or buy the underlying asset at a fixed price before a given expiration date.
Call options are commonly traded in the derivatives market and serve multiple purposes for investors. They act as a form of insurance against price fluctuations, as they allow the holder to protect themselves against potential losses. Additionally, call options can provide potential profit opportunities by leveraging market movements.
When purchasing a call option, the buyer pays a premium to the seller, who is obligated to sell the underlying asset if the buyer chooses to exercise the option. However, the buyer is not obliged to exercise the option and can choose to let it expire worthless if it does not align with their investment objectives.
Call options are widely used by investors and traders to speculate, hedge risks, and enhance their portfolio returns. They can be customized with different strike prices, expiration dates, and underlying assets depending on the investor's strategy and market conditions.
Common Misspellings for CALL OPTION
- xall option
- vall option
- fall option
- dall option
- czll option
- csll option
- cwll option
- cqll option
- cakl option
- capl option
- caol option
- calk option
- calp option
- calo option
- call iption
- call kption
- call lption
- call pption
- call 0ption
Etymology of CALL OPTION
The word "call option" originates from the field of finance and specifically, from options trading.
The term "call" in "call option" comes from the concept of being able to "call" or demand the purchase of an underlying asset at a specified price within a specific timeframe. It gives the holder the right, but not the obligation, to purchase the asset (such as stocks, bonds, or commodities) at a predetermined price, known as the strike or exercise price, before the expiration date.
The use of the word "option" refers to the fact that the holder has the choice or option to exercise the right to buy the asset but is not obligated to take action if they do not wish to.
Similar spelling words for CALL OPTION
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