ShmoopTube
Where Monty Python meets your 10th grade teacher.
Search Thousands of Shmoop Videos
Board of Directors Videos 111 videos
What are Passive Investing and Passive Investors? Passive investing and passive investors are ones who opt to ride the market out over the long ter...
When a bond is secured, it means it's protected, i.e. there are assets that would be forfeited if repayment is not made. When it's unsecured... it'...
Power of attorney refers to the authorization to conduct business on legal and financial matters on behalf of another party. So...choose wisely.
Finance: What Is a Call Option? 25 Views
Share It!
Description:
What is a call option? A call option is a type of contract that lets the investor buy shares of a stock at a certain price and within a window of time. Calls are bought when investors think a stock will increase in value, because they are able to buy at a price that’s higher than what the stock is actually currently worth.
- Social Studies / Finance
- Finance / Financial Responsibility
- Life Skills / Personal Finance
- Finance / Finance Definitions
- Life Skills / Finance Definitions
- Finance / Personal Finance
- Courses / Finance Concepts
- Subjects / Finance and Economics
- Finance and Economics / Terms and Concepts
- Terms and Concepts / Derivatives
- Terms and Concepts / Ethics/Morals
- Terms and Concepts / Accounting
- Terms and Concepts / Banking
- Terms and Concepts / Board of Directors
- Terms and Concepts / Bonds
- Terms and Concepts / Charts
- Terms and Concepts / Company Management
- Terms and Concepts / Company Valuation
- Terms and Concepts / Credit
- Terms and Concepts / Econ
- Terms and Concepts / Financial Theory
- Terms and Concepts / Forex
- Terms and Concepts / Investing
- Terms and Concepts / Managed Funds
- Terms and Concepts / Marketing
- Terms and Concepts / Metrics
- Terms and Concepts / Real Estate
- Terms and Concepts / Stocks
- Terms and Concepts / Trading
- Terms and Concepts / Wealth
- College and Career / Personal Finance
Transcript
- 00:00
finance a la shmoop. what is a call option? option? option, where are you? okay
- 00:09
yeah yeah. not phone options, call options. and a close but no cigar. a call option [man smokes in a tub of cash]
- 00:14
is the right to call or buy a security. the concept is easy the math is hard.
- 00:24
you think Coca Cola's poised for a breakout as they go into the new low
- 00:30
calorie beverage business. their stock is at 50 bucks a share and you can buy a [man stands on a stage as crowd cheers]
Full Transcript
- 00:35
call option for $1. well that call option buys you the right
- 00:39
to then buy coke stock at 55 bucks a share anytime you want in the next
- 00:44
hundred and 20 days. so let's say Coke announces its new sugarless drink flavor
- 00:48
zero it's two weeks later and the stock skyrockets to fifty eight dollars a
- 00:53
share. you've already paid the dollar for the option now you have to exercise it. [man lifts weights]
- 00:59
so you buy the stock and you're all in now for fifty five dollars plus one or
- 01:04
fifty six bucks a share and your total value is now fifty eight bucks. well you
- 01:10
could turn around today and sell the bundle that moment, and you'll have
- 01:13
turned your dollar into two dollars of profit really fast. and obviously had the [equation on screen]
- 01:18
stock not skyrocketed so quickly well you would have lost everything. still you
- 01:23
lucked out and now you're sitting on some serious cash, courtesy of your call [two men in a tub of cash]
- 01:27
options. as for Coke flavor zero turned out to be nothing more than canned water.
Related Videos
GED Social Studies 1.1 Civics and Government
What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...
What's a dividend? At will, the board of directors can pay a dividend on common stock. Usually, that payout is some percentage less than 100 of ear...
How are risk and reward related? Take more risk, expect more reward. A lottery ticket might be worth a billion dollars, but if the odds are one in...