# Call Options Primer

### What Are Call Options? <a href="#mntl-sc-block_1-0" id="mntl-sc-block_1-0"></a>

Options are financial contracts that give the holder the right to buy a token at a specific price for a certain period of time.&#x20;

Options are known as derivatives because they derive their value from an underlying token.

### Terminology <a href="#mntl-sc-block_9-0" id="mntl-sc-block_9-0"></a>

**Strike price**: This is the price at which an option can be exercised.

**Duration**: This is the period of time at which an option expires and becomes worthless.

**Option premium**: This is the price at which an option is purchased.

**In the money (ITM)**: Options with strike prices that would give you the right to trade the stock at a better price than the current price of the token. For calls, it’s the options with strike prices that are lower than the token price.

**At the money (ATM)**: Options with a strike price that’s either right at (or very close to) the token price. This can include the nearest ITM and OTM options since the stock is rarely exactly at the money.

**Out of the money (OTM)**: Options with strike prices that would give you the right to trade the token at a worse price than the current price of the token. For calls, it’s the options with strike prices that are higher than the token price.

### Why consider buying calls?

Because you think the underlying token is going up. Period.

{% hint style="info" %}
Here’s a simple example...If $CHAMP is trading at $3.00 and you have a call option with a strike price of $1.25. You can exercise your option and sell your token for a net profit of $3.00 - $1.25 = $1.75.&#x20;
{% endhint %}

### What drives options prices?

**Price**: The token price compared to strike price.

**Time**: The number of calendar days or years until expiration.

**Implied Volatility:** How much the stock is expected to move in a given timeframe

<figure><img src="https://2813571941-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fi38WXnt1syJKESJsb1bL%2Fuploads%2FKJfvH1QHuUMlBSg42DWg%2FScreen%20Shot%202024-09-15%20at%203.01.51%20AM.png?alt=media&#x26;token=fed48d4b-a943-49c8-9eaf-e46ffc5864fd" alt=""><figcaption><p>Option Value Breakdown</p></figcaption></figure>
