What is a Call Option?

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• What is the effect of selling a Call Option?

  The seller of the call option has an obligation to sell the underlying asset at the strike price if the buyer of the call option chooses to execute his right. The seller receives a ‘Premium’ from the buyer.

• When does the buyer of a call option benefit?

  The buyer of the call option benefits when the price of the underlying asset is above the strike price at the expiry of the contract.

• When does the seller of a call option benefit?

  The seller of the call option benefits when the price of the underlying asset is below the strike price at the expiry of the contract.

• What is Out of The Money (OTM) Call Option?

  A call option is said to be OTM when the underlying security’s current market price is lesser than the strike price of the contract.

• What is At the Money (ATM) Call Option?

  A call option is said to be ATM when the underlying security’s current market price is equal to the strike price of the contract.