The option premium is the amount paid for the call option itself. Generally, this is a nominal amount, since the option holder is generally required to pay the exercise price of the shares at the time of the exercise. The option premium is different from the exercise price (explained below). If an option bonus is required, it is paid to the option giver when the agreement is reached. An option premium is not always provided for in an appeal option agreement and the inclusion of an option depends on the terms and conditions of the agreement. Sales buyers have the right, but not the obligation to sell shares at the exercise price in the contract. On the other hand, options sellers are required to carry out their business activity when a buyer decides to execute a call option to purchase the underlying warranty or to execute a put-on option for sale. Buyers of put options speculate on the decline in the price of the underlying stock or the underlying index and have the right to sell shares at the exercise price of the contract. If the share price falls below the exercise price before the expiry of the exercise price, the buyer can either assign the seller shares for sale at exercise prices or sell the contract if shares are not held in the portfolio. Some investors use call options to generate revenue through a secure call strategy. This strategy involves owning an underlying stock while writing an appeal option, or giving someone else the right to buy your stock.

The investor cashes the option premium and hopes that the option will run worthless (below the strike price). This strategy generates additional income for the investor, but it can also limit the potential profit if the underlying share price rises sharply. A call option, often simply called a «call,» is a contract between the buyer and seller of the call option to exchange a warranty at a specified price. [1] The purchaser of the appeal option has the right, but not the obligation to purchase an agreed quantity of a commodity or financial instrument (the underlying) from the seller of the option at a given time (the expiry date) at a specified price (the exercise price). The seller (or «writer») is required to sell the merchandise or financial instrument to the buyer if the buyer so decides. The buyer pays a fee for this fee (called premium). The term «call» comes from the fact that the owner has the right to call the seller`s «action away.» Buyers of options on the European model can only use the option – buy the underlying – on the expiry date. Options expire and can be short-term or long-term. ABC`s shares sell for $60, and a caller wants to sell calls for $65 for a month. If the share price stays below $65 and the options expire, the caller retains the shares and can collect an additional premium by re-depreciating the calls. A very useful way to analyze and track the value of an option position is to draw a loss/profit diagram that shows how the value of the option changes with changes in the base inventory price and other factors.

For example, this profit/loss graph shows the profit/loss of a call option (with a $100 strike and a 30-day duration) purchased at a price of 3.5 DOLLARS (Blue Chart – the day the option was purchased; Orange chart – at expiration): Adaptation to the Call option: If a call has the strike price above the same break limit, i.e. if the buyer makes power, there are many options to explore. Some of them are: Before entering into an appeal option agreement, make sure you are familiar with the concept of option shares, how they work and when you can exercise the right to buy or sell them.