Call Options
A contract giving the buyer the right — not the obligation — to BUY 100 shares of the underlying at the strike price before expiration; the buyer is bullish, and the seller (writer) is obligated to deliver if exercised.
SIE items rarely ask “what is a call” outright — they hand you a strike, a premium, and a stock price and make you pick which party is bullish versus bearish. The reliable tell: the buyer of a call wants the stock to rise, so the call buyer and the put writer sit on the same bullish side, while the call writer and put buyer are bearish-to-neutral. Watch the “right versus obligation” trap — the buyer holds the right, the writer carries the obligation to deliver 100 shares if exercised, and only the writer faces assignment (the OCC assigns it randomly).
The classic confusion is naked versus covered: a naked call writer owns nothing and bears unlimited loss (the stock can rise forever), whereas a covered call writer already owns the 100 shares — the most conservative way to write a call and a common income play (not a risk-free strategy). Don’t mix up the products: a put is in-the-money when market is below strike — the mirror image of a call.
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