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Call option

Contract giving a buyer the right to buy a security from the seller at a set price

Wikipedia contributorsAdapted for Fathomly · View authors
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Source updated June 16, 2026
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In finance, a call option (often simply a "call") is an option contract that gives its buyer the right, but not the obligation, to buy an agreed quantity of a particular commodity, security, or other financial instrument from the seller at a specified price. The asset or instrument to which the option relates is known as the underlying, and the specified purchase price is known as the strike price. The right may be exercisable at or before a specified date, depending on the terms of the option.

The seller, or "writer", of the call option is obliged to sell the underlying to the buyer if the buyer exercises the option. The buyer pays the seller a premium for this right. A call option gives the buyer positive exposure to the underlying asset, while the writer has the corresponding obligation if the option is exercised. The term "call" comes from the fact that the owner has the right to "call the stock away" from the seller.

01Price of options

The value of an option depends on factors including the price of the underlying instrument, the strike price, the time to expiry, interest rates, expected dividends, and expected volatility.

For a call option, the payoff at expiry is the excess, if any, of the market value of the underlying instrument over the strike price, written as \max(S_{T}-X,0). Greater volatility generally increases the value of a call option, because it increases the probability of a high payoff. A longer time to expiry can also increase the value of an option, because it gives the option more opportunity to finish in the money. Interest rates affect the present value of the future payoff, while expected dividends or other distributions may reduce the value of a call option by reducing the value of the underlying instrument when they are paid.

Determining option values is one of the central functions of financial mathematics. A common method is the Black-Scholes model, which gives a theoretical price for European-style options under specified assumptions.

Profits from writing a call.
Profits from writing a call.
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Sources and credits

This article is adapted from the Wikipedia article “Call option”, written by its contributors and licensed under CC BY-SA 4.0. Fathomly has changed the layout, removed citation markers, navigation and maintenance notices, and adjusted punctuation. This adapted version is shared under the same license. For references, see the original article.

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Related topics

Covered option

A covered option is a financial transaction in which the holder of securities sells an options contract, either a "call option" or a "put option", against stock that they own or are short, respectively. The seller of a covered option receives compensation, or "premium", for this transaction, which can limit losses; however, the act of selling a covered option also limits profit potential and so the strategy reduces both risk and potential return.

Moneyness

In finance, moneyness is the relative position of the current price of an underlying asset (e.g., a stock) with respect to the strike price of a derivative, most commonly a call option or a put option. Moneyness is firstly a three-fold classification: If the derivative would have positive intrinsic value if it were to expire today, it is said to be in the money (ITM); If the derivative would be worthless if expiring with the underlying at its current price, it is said to be out of the money (OTM); And if the current underlying price and strike price are equal, the derivative is said to be at the money (ATM).

Naked option

A naked option or uncovered option is an options strategy where the options contract writer does not hold the underlying asset to cover the contract in case of assignment (like in a covered option). Nor does the seller hold any option of the same class on the same underlying asset that could protect against potential losses (like in an options spread).