Financial contracts known as call options grant the option buyer the right, but not the duty, to purchase a stock, bond, commodity, or other asset or instrument at a particular price within a predetermined window of time.
The underlying asset is a stock, bond, or product. When the value of the underlying asset rises, the call buyer makes money.
A put option, as contrast to a call option, allows the holder to sell the underlying asset at a predetermined price on or before the expiration date.
Assume that stock is the underlying asset. Call options grant the holder the right to purchase 100 shares of a firm at the strike price up until the expiration date, at the specified price (known as the strike price).
As detailed below, there are two different call option kinds. Long call possibility: an ordinary call option that gives the buyer the right but not the duty to purchase a stock at a strike price in the future is known as a long call option.
The benefit of a long call is that it enables us to foresee the future and buy a stock at a discount.
Short call option: A short call option is the reverse of a long call option, as its name suggests. A seller of a short call option commits to selling their shares at a certain strike price in the future.
For covered calls or call options where the option seller already owns the underlying stock for their options, short call options are typically employed. If the deal does not work out for them, the call helps them limit their losses.