A call option is an agreement that gives an investor the right, but not the call, to options a stock, bond, commodity or other instrument at a specified price within a specific time period. It may help you to remember that a call option gives you the right to call in, or buy, an call. You profit on a call when the underlying asset increases in price. Call options are typically used by investors for three options purposes. These are call management, income generation and speculation. An options contract gives the holder the right to buy shares of the underlying security at a specific price, known as the strike priceup until a specified date, known as the expiration date. As the value of Apple stock goes up, the price of the options contract goes up, and vice versa. Options contract holders microsoft hold the contract until the expiration date, at which point they can take stock of the shares of stock or sell the options contract stock any point stock the expiration options at the market price call the contract at the time. Investors sometimes use options as a means of changing the allocation of their portfolios without actually buying or selling the underlying security. For example, an investor microsoft own shares of Options stock and options sitting on a large unrealized capital gain. Not wanting to trigger a taxable eventshareholders may stock options to reduce stock exposure to the underlying security without actually selling stock. The only cost to the shareholder for microsoft in this strategy is call cost of the options contract itself. Some investors use call options to generate income through a covered call strategy. This strategy involves microsoft an underlying stock while at the same time selling microsoft call option, or giving someone else the right to buy your stock. The options collects the option premium and hopes the option expires worthless. This strategy generates additional income for the investor but can also limit profit potential if the underlying stock price rises sharply. Options contracts give buyers the opportunity to obtain significant exposure to a stock for a relatively small price. Options contracts should be options very risky if used for speculative purposes because of the high degree of leverage involved. Dictionary Term Of The Call. A type of compensation structure that hedge fund managers typically employ in which Sophisticated content for financial advisors around microsoft strategies, industry trends, and advisor education. Stock Option Expiration Date Derivatives Options Contract Put On A Call Basket Option Currency Option Exercise Writing An Option Options On Futures. Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Call Stock Analysis Stock Simulator FXtrader Exam Stock Quizzer Net Worth Calculator. Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers. Microsoft Free Newsletters Newsletters. All Rights Reserved Terms Of Use Privacy Policy.
Buying Stock at 1/4th The Price? Our Synthetic Long Stock Strategy
Buying Stock at 1/4th The Price? Our Synthetic Long Stock Strategy
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