Options mechanics
What is a Call Option and what rights does it confer to the buyer?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
A call option gives the buyer the right to purchase 100 shares of the underlying stock at the strike price before or at expiration, in exchange for paying a premium to the seller.
How it works
Call buyers profit when the underlying rises above the strike plus premium paid, while risk is limited to the premium paid; sellers of calls collect premium but face theoretically unlimited loss if uncovered.
An example
Buying one XYZ 100 call for $2.00 premium costs $200 total and becomes profitable above $102 per share at expiration, ignoring commissions.
Risk & limitations
Calls lose value from time decay and can expire worthless even if the stock direction is correctly predicted but the move happens too slowly or too late.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.