You can think of a call option as a bet that the underlying asset is going to rise in value.

The following example illustrates how a call option trade works. In this case, your option is in the money, because the strike price is less than the market price of the underlying asset. When you, the option holder, put in your order, the dealer searches for someone on the other side of the trade, in other words the option writer, with the same exercise call option dividends and strike price of the option.

The writer is then assigned the trade and must sell his shares 4xp hedging spot forex binary options review you, if you exercise the option. A put assignment, on the other hand, requires the person who sold you the put on the other side of the trade again, the put writer to buy the stock from you, the put holder. You have two other possibilities: According to the CBOE, most options never are exercised.

Instead, most traders sell the option back to the market. Toggle navigation Search Submit. Learn Art Center Crafts Education Languages Photography Test Prep.

Understanding How Dividends Affect Option Prices | Investopedia

RELATED ARTICLES How a Call Option Trade Works. Top Sources for Fundamental Analysis Data Online.

Gathering the Key Documents for Fundamental Analysis. Trading Options For Dummies Cheat Sheet. Swing Trading For Dummies Cheat Sheet. How a Call Option Trade Works.