call option

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A contract giving the holder the right, but no obligation, to buy a fixed number of units of an asset on (or before) some future date (the exercise date) at a pre-arranged price (the strike price). A European call option can be exercised only at the final exercise date. An American call option can be exercised at any time up until the exercise date. A call option will never be exercised if the spot price of the asset is below the strike price in the contract.

Subjects: Economics.

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