Glossary

Call option

Call options are financial contracts that give you the right, but not the obligation, to buy a market at a specific price within a specific time. The buyer of a call option can profit when the underlying market rises in price.

Call options explained

When you buy a call option, you’re taking a long position on the price of the underlying asset. If the price of the underlying asset rises above the price of your option before the contract expires, you could exercise your option. This would mean you could buy the asset for below its current market value.

But if the price of the underlying falls, you’d have no obligation to buy the asset at the expiry. This means you wouldn’t lose money by paying above market price, although you would lose the premium you paid for the option.

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