Call Options are an agreement that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other instrument at a specified price within a specific time period. The stock, bond, or commodity is called the underlying asset. A call buyer profits when the underlying asset increases in price. Call options are attractive to traders and investors because they provide a way to Leverage their capital for greater investment returns. A trader might buy a call option on the stock – instead of buying the stock outright. For example, an out-of-the money call option may only cost a few dollars or even cents compared to the full price of a $100 stock. |
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