Call

A call is a type of options contract. Buying a call gives you the right, but not the obligation, to purchase a specific stock (or other asset) at a set price, called the strike price, any time before the contract expires. You pay a fee, called the premium, to have that right.

Here's how it works in practice: if a stock is trading at $50 and you think it's going higher, you might buy a call with a strike price of $55. If the stock rises above $55 before expiration, your call becomes valuable because it lets you buy shares at $55 even though they're worth more on the open market. If the stock stays below $55, the call can expire worthless, and the only money you lose is the premium you paid.

The other side of the trade is the person who sold, or "wrote," the call. That seller collects the premium upfront but takes on the obligation to sell shares at the strike price if the buyer decides to exercise the option. Sellers of calls are betting the stock will stay flat or fall, or at least not rise past the strike.

The nuance that trips up beginners is that owning a call is not the same as owning the stock. It's a separate, time-limited contract whose value depends on the stock price, how much time is left, and how volatile the stock is. A call can lose most of its value quickly even if the stock barely moves, simply because time is running out — an effect traders call time decay. This is very different from owning shares outright, where your only real risk is the price of the stock itself.