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Glossary
Call option
Definition
An opportunity to buy or sell an underlying instrument.
If you buy a call option, this means you have the right, but not the obligation to buy the underlying instrument at the agreed strike price on the agreed expiry date (for a European option).
If you sell a call option, this means you have the obligation to sell the underlying instrument at the agreed strike price on the agreed expiry date (for a European option).
American options can be exercised at any time until the expiration date.
What is a call option?
A call option is a financial contract that gives the holder the right, but not the obligation, to buy a specified amount of an underlying asset at a predetermined price within a specified time frame. It's often used to speculate on the rise of an asset's price or to hedge against a rise in the price of a future purchase.
Why are call options important to consider when trading?
Call options are important for traders as they offer a way to leverage their investment with limited risk. They can profit from a rise in the market without the need to invest the full amount required to own the underlying asset. Understanding call options allows traders to make strategic decisions in bullish market conditions and manage risk effectively, especially in volatile markets.