Glossary
Call option: meaning, example and why it matters
A contract that gives the buyer the right, but not the obligation, to buy an underlying asset at a fixed strike price on or before expiry. The buyer pays a premium for this right.
Worked example
A call with a ₹500 strike costs a premium of ₹20 per share. If the stock is at ₹540 at expiry the call is worth ₹40 (540 − 500), a ₹20 gain per share after the premium. At ₹500 or below it expires worthless and the ₹20 premium is lost.
Illustrative numbers for explanation only. They are not market data, a forecast or a suggestion.
Why it matters
It shows how an option's risk is shaped: the holder's loss is capped at the premium paid, while the writer of the contract can face much larger losses.
Related terms
See it in practice
Frequently asked questions
What is the most a call option holder can lose?
The premium paid. The holder is not obliged to exercise, so the loss is capped at that amount.
Is this page investment advice?
No. Call option is explained in general terms with illustrative numbers. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser.
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Start learning free →Educational content, not investment advice. Market Dekho is not a SEBI-registered Research Analyst or Investment Adviser. Spotted a mistake? Email marketdekho01@gmail.com.