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((Short description|Contract giving a buyer the right to buy a security from the seller at a set price))
((About|financial options|call options in general|Option (law)))
((refimprove|date=October 2011))

[[File:Long call option.svg|thumb|right|200px|Profits from buying a call.]]
[[File:Short call option.svg|thumb|right|200px|Profits from writing a call.]]

In [[finance]], a '''call option''', often simply labeled a "'''call'''", is a [[contract]] between the buyer and the seller of the call [[Option (finance)|option]] to exchange a [[Security (finance)|security]] at a set [[price]].<ref>((cite book|first1=Arthur|last1=O'Sullivan|author-link1=Arthur O'Sullivan (economist)|first2=Steven M.|last2=Sheffrin|author-link2=Steven M. Sheffrin|title=Economics: Principles in Action|url=https://archive.org/details/economicsprincip00osul|url-access=limited|publisher=[[Pearson Prentice Hall]]|year=2003|location=Upper Saddle River, New Jersey 07458|page=[https://archive.org/details/economicsprincip00osul/page/n304 288]|isbn=0-13-063085-3))</ref> The buyer of the call option has the right, but not the obligation, to buy an agreed quantity of a particular [[commodity]] or [[financial instrument]] (the [[underlying]]) from the seller of the option at or before a certain time (the [[Expiration (options)|expiration]] date) for a certain price (the [[strike price]]). This effectively gives the owner a [[Long (finance)|''long'' position]] in the given asset.<ref>((Cite book|last=Natenberg|first=Sheldon|url=https://www.worldcat.org/oclc/44962925|title=Option volatility and pricing strategies : advanced trading techniques for professionals|date=1994|publisher=McGraw-Hill|isbn=0-585-13166-X|edition=[2nd ed., updated and exp.]|location=New York|oclc=44962925))</ref> The seller (or "writer") is obliged to sell the commodity or financial instrument to the buyer if the buyer so decides. This effectively gives the seller a [[Short (finance)|''short'' position]] in the given asset. The buyer pays a fee (called a [[Insurance|premium]]) for this right. The term "call" comes from the fact that the owner has the right to "call the stock away" from the seller.

==Price of options==
Option values vary with the value of the underlying instrument over time. The price of the call contract must act as a proxy response for the valuation of:
* the [[expected value|expected intrinsic value]] of the option, defined as the expected value of the difference between the strike price and the market value, i.e., max[S−X, 0].<ref name=":0">((Cite book |last=Hull |first=John |title=Options, Futures, and Other Derivatives 10th Edition |publisher=Pearson |year=2017 |isbn=978-0134472089 |pages=231-246))</ref>
* the [[risk premium]] to compensate for the unpredictability of the value
* the [[time value of money]] reflecting the delay to the payout time
The call contract price generally will be higher when the contract has more time to expire (except in cases when a significant [[dividend]] is present) and when the underlying financial instrument shows more [[Volatility (finance)|volatility]] or other unpredictability. Determining this value is one of the central functions of [[financial mathematics]]. The most common method used is the [[Black–Scholes model]], which provides an estimate of the price of European-style options.<ref>((cite book |title=Finance for Executives: A Practical Guide for Managers |first=Nuno |last=Fernandes |year=2014 |page=313 |publisher=NPV Publishing |isbn=978-9899885400))</ref>

==See also==
*[[Covered call]]
*[[Moneyness]]
*[[Naked call]]
*[[Naked put]]
*[[Option time value]]
*[[Pre-emption right]]
*[[Put option]]
*[[Put–call parity]]
*[[Right of first refusal]]

==References==
((Reflist))

((Derivatives market))

[[Category:Options (finance)]]

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