A call option is a contract that grants the buyer the right, but not the obligation, to purchase a specific asset at a specific price and on a specific date. If the asset's market price rises, the value of a call option rises as well.

If the option is exercised by the buyer, also known as the holder, the seller, also known as the writer, is obligated to sell the underlying asset at the agreed-upon price, known as the strike price. The seller is compensated for taking on the risks associated with the obligation to sell.