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Answer Posted / bushi
call option is the option that gives its holder the right to
buy a certain underlying asset at some fixed price called
strike/exercise price determine by the maker of the option
and at some specified date called expiration or maturity date.
The option holder have to pay an up-front price to buy the
option called Premium.
Important thing is that the option holder not necessarily
have to exercise the option, Its the choice of the option
holder as to whether to exercise the option or not depending
on the market situation.However if the option holder do not
exercise it, he would only be having a net loss equal to the
amount of premium.
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