Call definition

A call option is a financial derivative that grants the buyer the right, but not the obligation, to purchase a specified quantity of an underlying asset—such as a stock, index, or commodity—at a predetermined price (called the strike price) within a defined time period. The buyer pays a premium to the seller (or writer) of the call for this right. If the market price of the asset exceeds the strike price before the expiration date, the option is considered in the money, and the buyer can profit by exercising the option or selling it on the open market.

Call options are widely used by investors for both speculative and hedging purposes. Speculators buy calls to bet on upward price movements in the underlying asset, aiming to achieve leveraged gains with limited capital outlay. For instance, instead of purchasing 100 shares of a stock, an investor can buy a call option representing the same exposure for a fraction of the cost.

The value of a call option is influenced by several factors, collectively known as the Greeks. These include Delta (sensitivity to the underlying asset’s price), Theta (time decay), Vega (sensitivity to implied volatility), and Rho (sensitivity to interest rates). As expiration approaches, the time value of the option diminishes, often leading to increased volatility in pricing. Understanding how these variables interact is essential for successfully incorporating call options into broader trading or investment strategies.

TWS Call Option

Call

Information on Other Interactive Brokers Affiliates

Interactive Brokers Canada Inc.

Interactive Brokers Australia Pty. Ltd.

Interactive Brokers Hong Kong Limited

Interactive Brokers India Pvt. Ltd.

Interactive Brokers Securities Japan Inc.

Interactive Brokers Singapore Pte. Ltd.

Bi-Weekly Newsletter

Daily Newsletter

Weekly Newsletter

Weekly Newsletter

Monthly Newsletter