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In plain English, what's a call option?

In plain English, what's a call option?

Buying a call option means that you can buy 100 shares of a stock at a particular price, but you don't HAVE to.

The price at which you can buy is called the strike price.

You generally buy a call option when you think that a stock is going to rise in value.

For example, say that DELL is selling at $50, but you think that by spring it's going to be above $60. You might then buy a call option with a strike price from $50 to $60.

If you're right, you can either sell the call (at a price higher than you paid for it) or exercise the call & buy the stock,

It's an agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period. (for e.g. you are given the right to buy a stock for $100 before the end of this month. You can choose to exercise the option or you can choose not to. You are not obliged to exercise the option)

Investopedia Says:
It may help you to remember that a call option gives you the right to "call in" (buy) an asset. You profit on a call when the underlying asset increases in price.

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