Listen to a Business English Dialogue About Call options
Evelyn: Hi Scarlett, have you heard of call options in finance?
Scarlett: Hi Evelyn. Yes, call options give the buyer the right, but not the obligation, to buy a specific asset at a predetermined price within a specified period.
Evelyn: That’s correct. Can you explain how call options work in a simple way?
Scarlett: Certainly, Evelyn. Let’s say you buy a call option for a stock at $50 with an expiration date in one month. If the stock price rises above $50 before the expiration, you can exercise the option to buy the stock at $50, potentially making a profit.
Evelyn: I understand. What happens if the stock price doesn’t rise above the $50 strike price?
Scarlett: If the stock price remains below $50 until expiration, the call option expires worthless, and you lose the premium you paid to buy the option. It’s important to remember that with call options, you have the right but not the obligation to buy the underlying asset.
Evelyn: Thanks for clarifying, Scarlett. Call options seem like a useful tool for investors to potentially profit from price movements in the market.
Scarlett: Absolutely, Evelyn. Call options can provide investors with opportunities to benefit from bullish market conditions while limiting their downside risk. If you have any more questions about call options or anything else, feel free to ask.
Evelyn: Will do, Scarlett. Thanks again for the explanation.