◈ GLOSSARY · TRADING & MARKETS
Call Option.
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
A contract that gives the buyer the right — not the obligation — to buy 100 shares of a stock at a fixed price (the strike) before a set expiration. Buyers pay a premium for that right; sellers collect the premium and take on the obligation. Options are not a beginner instrument: most expire worthless, and the leverage cuts both ways.
◈ IN PRACTICE
Example
A stock trades at $100. You buy one $105 call expiring in 30 days for a premium of $2.00 — total cost $200 (one contract = 100 shares). If the stock closes at $110 at expiration, the call is worth $5.00, or $500 — a $300 gain. If it closes below $105, the call expires worthless and you lose the full $200.