Call Option
An option giving its buyer the right to buy the underlying at the strike price on or before expiry.
Formula
Payoff at expiry for the buyer = max(Spot - Strike, 0) - Premium Paid
Unit
₹
In depth
A call buyer profits only if the underlying rises above the strike by more than the premium paid, which means being right about direction is not sufficient — the move must be large enough and must happen before expiry. This is the difference between owning the underlying, which needs only direction, and owning a call, which needs direction, magnitude and timing together. The maximum loss is the premium, which is genuinely capped, and the probability of losing all of it is high for out-of-the-money strikes. Writing a call carries the opposite profile and is not the mirror image in risk terms.
Worked example
A 24,000 call bought for 300 breaks even at 24,300. At an expiry of 24,200 the option is worth 200, so the holder loses 100 x 75 = ₹7,500 despite the index having risen 200 points.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Call Option” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.