What Is a Call Option, and How Does It Relate to Financial Derivatives?

A call option is a financial derivative contract that gives the holder the right, but not the obligation, to buy an underlying asset at a specified price (strike price) on or before a specific date (expiration date). It is a derivative because its value is derived from the price of the underlying asset, such as a stock or a cryptocurrency.

Buyers profit if the underlying price rises above the strike price plus the premium paid.