Call Option

Posted on February 11, 2011 by Thomas DeGrace

Call option is the right to purchase stock at a strike price at any time before the predetermined deadline.  After the deadline, the option is expires.

Understand How Call Option Works

The advantage of a call option is the ability to control a large amount of shares with just a little bit of money.  If the option never makes the call price though, you lose all of your money paid for the option. (such as a call option to buy WMT at 50 at $2 a option with a May deadline.  Your cost is 2 dollars for every option you take.  So if you take 10 options and WMT makes it to 55 in May u make $3 a option)

Related posts:

  1. Strike Price
  2. Margin Call
  3. Covered Calls Strategy of How to Write Calls for Maximum Profit

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