Call Option

A call option is a financial contract that allows its holder to purchase a specific asset at a set price, called the strike price, by a certain expiration date. Investors use call options to bet on price increases (leverage) or to protect other investments (hedge). Every call option is defined by two key details: the strike price and when it expires.

When the current market price (spot price) of the asset exceeds the option’s strike price, the call option is considered “in the money.” This means the holder could buy the asset below its current market value and immediately sell it for a profit. For instance, if you own a call option to buy one bitcoin at $10,000 and the market price rises to $15,000, you could use your option to buy at $10,000, sell for $15,000, and make $5,000 (not accounting for the cost of the option itself).

However, whether a call option trade is truly profitable depends on whether this gain is greater than the premium (price) paid to purchase the option.

You don't have to actually buy the asset to benefit from a call option. Options can be sold to others on the market before they expire. If the price of the underlying asset rises, the value of your call option often goes up, making it more valuable to other traders. Keep in mind, if there’s not enough market activity (low liquidity), reselling the option may not always be easy.