An equity call option is a security that gives the buyer (AKA “owner” or “long”) the right, but not the obligation, to purchase 100 shares of the underlying stock at a specified price (the strike price) at any time until the option expires (the “expiration date”). For this right the buyer of the call option pays the seller of the call option a premium (calculated on a per share basis).
Example: The buyer of one ABC Jan 45 call option at 3 has the right to buy 100 shares of ABC at $45 per share until January expiration. For this right the buyer paid the seller $3 per share, or a total of $300.
The seller (AKA “writer” or “short”) has the obligation to sell 100 shares of the underlying stock at the stated exercise price if assigned an exercise notice at any time before the option expires.
Example: The seller of one XYZ June 90 call option at 6 has the obligation to sell 100 shares of XYZ stock at $90 per share if assigned at any time until the June expiration. In exchange for taking on this obligation the seller of the call receives $6 per share, or a total of $600.
Call options always have two counter-parties: 1) a buyer and 2) a seller. The buyer has the right to buy shares at a set price, and the seller has the obligation to sell shares at a set price.