Call definition

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Calls are option contracts that allow traders to profit when an asset’s price increases beyond a certain point within a specified time. They are the opposite of puts, which return a profit when an asset’s price decreases beyond a certain point within a defined period of time.

A call option gives the trader the right, but not the obligation, to buy a certain market at a certain price (called the strike price) before its expiry date. 

Call example

If you buy a call option on Apple at $130 before the end of the week, for instance, you can decide to buy Apple for that price at any point that week. If Apple’s stock exceeds $130 in value then the option is in profit, or in the money. You can then execute the option and buy the stock. If Apple never reaches $130 then no profit can be made, but the only loss is the initial premium paid to take out the call option.

New to options?

Read our options education section.

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