Call

In business and finance, the term call refers to the call option. A call option is a financial contract between two parties stating that one of the parties, the buyer, has the option or opportunity to buy or purchase an asset owned by the other party, or the seller, within the time specified in the contract.

In this agreement the buyer has the right to buy the asset but is under no obligation to do so. However, the buyer has to pay the seller a flat fee, called a premium, in order to have the right to call. The seller, on the other hand, is obligated to sell the asset(s) listed on the contract to the buyer and may not entertain other offers for the asset(s) listed on the contract during the contract period.

Call options always list the price, called strike price, which the buyer will pay the seller for the asset(s) to be bought. This strike price is fixed upon signing of the call option. This means that if the asset’s price goes down before the contract period expires it is likely that the buyer will back out of the deal, especially since buyers usually enter a call option agreement in the hopes of seeing the asset value increase during the contract period so as to get a good bargain. If the asset price goes up the seller may sustain losses, unless the price difference is less than or equal to the premium or fee paid by the buyer.

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