Which statement best defines a 'Call' option?

Which statement best defines a 'Call' option?

• A. A right to sell an underlying asset at an agreed price
• B. A mandatory obligation to buy an asset
• C. A right to buy an underlying asset at a predetermined price
• D. A benefit received from owning shares

Answer: (C)

A 'Call' option is defined as the right to buy an underlying asset at a predetermined price, known as the strike price, within a specified time frame. This financial derivative gives the holder the potential to profit if the price of the underlying asset increases above the strike price before the option's expiration date. By exercising the call option, the holder can buy the asset at the agreed price rather than the current market price, allowing for possible gains. This mechanism plays a crucial role in options trading, as it provides flexibility and opportunities for investors to hedge positions or speculate on market movements.

A 'Call' option is defined as the right to buy an underlying asset at a predetermined price, known as the strike price, within a specified time frame. This financial derivative gives the holder the potential to profit if the price of the underlying asset increases above the strike price before the option's expiration date. By exercising the call option, the holder can buy the asset at the agreed price rather than the current market price, allowing for possible gains. This mechanism plays a crucial role in options trading, as it provides flexibility and opportunities for investors to hedge positions or speculate on market movements.