GLOSSARY // Options
Call Option
A call option gives the buyer the right, but not the obligation, to buy 100 shares of the underlying stock at a fixed strike price any time before expiration. The seller of the call takes the other side: if the buyer exercises, the seller must deliver the shares at the strike.
The buyer pays a premium for that right, and the premium is the most the buyer can lose. Profit at expiration requires the stock to finish above the strike by more than the premium paid — the breakeven is strike plus premium. Below the strike at expiration, the call expires worthless.
A stock trades at $195. You buy one 200 call expiring in 30 days for $3.50, which costs $350 because one contract controls 100 shares. Breakeven is $203.50. If the stock closes at $210 at expiration, the call is worth its $10.00 intrinsic value — $1,000 — for a $650 profit. If it closes at $199, the call expires worthless and you lose the full $350.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.