A call option gives the holder the right, but not the obligation, to purchase an underlying asset at a predetermined price, called the strike price, on or before the expiration date. It provides protection against upward movements in the price of the underlying asset. If the asset price rises above the strike price, the option holder can exercise their right to buy at the lower strike price, locking in a profit. However, if the asset price stays the same or falls, the holder does not exercise the option and simply lets it expire worthless. The key benefits are limited risk and unlimited profit potential if the price rises significantly.
In your own words, define a call option, its benefits and how it w.docx
1. In your own words, define a call option, its benefits and how it
works.
Your response should be at least 200 words in length. All
sources used, including the textbook, must be referenced;
paraphrased and quoted material must have accompanying
citations.
Moffett, M. H., Stonehill, A. I., & Eiteman, D. K. (2012).
Fundamentals of multinational finance
. (IV ed., pp. 207-211). New York: Pearson.
In-text citation
(Moffett, Stonehill & Eiteman, 2012)
No Wiki, no dictionary.com, please cite all work.
