The Law Dictionary

Featuring Black’s Law Dictionary Free Online Legal Dictionary 2nd Ed.

What is CALL OPTION

A DERIVATIVE contract that gives the buyer the right, but not the obligation, to purchase an UNDERLYING ASSET from the seller at a set STRIKE PRICE at, or before, expiry. In exchange, the buyer pays the seller a PREMIUM. Calls, which can be written on a broad range of financial and commodity references, are available as EXCHANGEtraded and OVERTHECOUNTER contracts, and can be structured as AMERICAN OPTIONS, BERMUDAN OPTIONS, or EUROPEAN OPTIONS. See also PUT OPTION.

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