Giving You the Power of Options
ABOUT OICPRESSCONTACTRELATED LINKSOIC Simplified ChineseInstitutional

Call Options

Tools

EmailEmail this page
PrintPrint this page

Questions?

While you’re getting started, you might have a few questions. Why not ask them to an Options Professional?

Call 1-888-OPTIONS
(between 7:30 a.m. and 5 p.m. CT) to find the answers you’re
looking for.

What is a Call Option?

A call option gives its holder the right to buy 100 shares of the underlying security at the strike price, anytime prior to the options expiration date. The writer (or seller) of the option has the obligation to sell the shares.

  Holder
(Buyer)		 Writer
(Seller)
Call
Option		 Right to
Buy		 Obligation
to sell
Put
Option		 Right to
sell		 Obligation
to buy

If the strike price of a call option is less than the current market price of the underlying security, the call is said to be in-the-money because the holder of this call has the right to buy the stock at a price which is less than the price he would have to pay to buy the stock in the stock market. The converse of in-the-money is, not surprisingly, out-of-the-money. If the strike price equals the current market price, the option is said to be at-the-money.

What’s the Net?

When an investor exercises a call option, the net price paid for the underlying stock on a per share basis will be the sum of the call’s strike price plus the premium paid for the call. Likewise, when an investor who has written a call contract is assigned an exercise notice on that call, the net price received on per share basis will be the sum of the call’s strike price plus the premium received from the call’s initial sale.

Volatility and the Greeks

Wondering why your call option on a particular stock did not increase in value on a day when that stock increased in price by several dollars? Perhaps a better understanding of the option “Greeks” can provide some insight into this phenomena. Although we expect call option prices to move in the same direction as the underlying security, we often find, in times of high volatility, this may not to be the case. Refer to our Volatility and the Greeks section for further explanations on why option prices may behave in this fashion. You may also find the option price behavior section of our Frequently Asked Questions (FAQ) helpful.