Glossary

A call option is a financial contract that gives the buyer the right, but not the obligation, to purchase an underlying asset, such as a stock, at a predetermined price (the strike price) before a specified expiration date.

Call options are typically used by investors who believe the asset's price will increase, allowing them to profit from the difference between the strike price and the market price. 📈

For example, an investor buys a call option on a stock with a strike price of $50, expiring in 3 months. If the stock price rises to $60 before the expiration date, the investor can exercise the option, buy the stock at $50, and sell it at the market price of $60, making a profit.

Fun fact: Call options are part of a broader category of financial instruments called "derivatives," as their value is derived from the performance of an underlying asset. They were first traded in ancient Greece, where philosophers and mathematicians, like Thales of Miletus, used options to speculate on olive harvests! 🌿