Call option is a contract between the buyer and the seller, in which the buyer has all the rights to purchase the specified shares at a fixed price within a fixed period of time. In call option buyer has the rights to purchase the specified securities whenever he or she is willing to, but it's not an obligation. Simple we can say that in the call option, choice is totally depended on buyer's, whenever he wants he can purchase the shares, he is not obliged to purchasing the share. If the buyer decides to purchase the stock from the seller, then seller is obligated to sell the shares.
These are the important term which is associated with call options:-
Option Premium:- Amount which buyer pays for the option
Premium = Time Value + Intrinsic Value
Intrinsic Value:- Stock’s current market price-Strike price
Strike Price:- price at which the stock can be purchased
Time Value:- Premium-Intrinsic Value
