PDSnet Glossary

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Definition

The purchased right to buy (call) specified securities at a specified price (strike price) within a specified period (American) or on a specified date (European). By the payment of a premium per share, the investor buys the right to demand a delivery of the shares at any time during the currency of the contract, at the ruling price when the call was purchased. This is useful when a sharp rise is anticipated, as the only immediate capital required is the call money, thus gearing the investment.

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