UK Accounting Glossary
A call option is an option contract that gives the owner (also called the buyer or holder) the right to buy (or “call”) a fixed amount of an underlying security at a stated price within a specified period of time. The owner of a call option has the right to call the security away from the option writer (seller) at a fixed price called the exercise or strike price. The writer of the call option is obligated to sell the security at a fixed price to the option holder if the holder of the call option chooses to exercise the call. An investor who is long a call option has the right to buy the underlying security, while an investor who is short a call option has an obligation to sell that security. A call option holder who exercises the call option will receive 100 shares of the underlying security.
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This glossary post was last updated: 4th February 2020.