In the special language of options, contracts fall into two categories – Calls and Puts. A Call Option represents the right of the holder to buy stock. A Put represents the right of the holder to sell stock.

Call Options

A Call option is a contract that gives the buyer the right to buy 100 shares of an underlying equity at a predetermined price (the strike price) for a preset period of time. The seller of a Call option is obligated to sell the underlying security if the Call buyer exercises his or her option to buy on or before the option expiration date. For example, an American-style WXYZ Corporation May 21, 2011 60 Call entitles the buyer to purchase 100 shares of WXYZ Corporation common stock at $60 per share at any time prior to the option’s expiration date of May 21, 2011.

Here’s a great video run down by the guys over at Tasty Trade!

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