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Derivatives

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  • July 23, 2022
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Call Price

The premium (price) of a call option. It is an amount paid by the call option’s buyer (holder) to the seller against the right to exercise on a pre-defined underlying asset. A call option is purchased by an investor who expects the price of its underlying would increase beyond the total of its strike price and the premium paid to its seller. In such a case, the call will be exercise, with the holder earning a profit measured as the “positive” difference between the current price of the underlying and the sum of strike price and premium. Otherwise, exercising the option will not be feasible for the holder. Therefore, the call expires worthless and unexercised.

It is also known as a call premium.


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