What is a call option?
An example of an AI chatbot conversation about call options in finance.
Can you explain what a call option is?
Sure! A call option is a financial contract that gives the buyer the right, but not the obligation, to purchase an asset at a specified price within a specific time period.
What does it mean to have the right but not the obligation?
It means that the buyer can choose whether or not to buy the asset at the agreed price, but they are not required to do so.
Why would someone want to buy a call option?
Investors buy call options to speculate on the price increase of an asset or to hedge against potential losses in their portfolio.
What are the risks involved with call options?
The main risk is that the option could expire worthless if the asset's price doesn't rise above the strike price, leading to a total loss of the premium paid.
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