In finance, business, and investing, "call" can have several different meanings depending on the context. Here are the most common ones:
Call Option:
Definition:Â A derivative contract that gives the buyer the right, but not the obligation, to buy a specific asset (stock, bond, commodity, etc.) at a specific price (strike price) within a specific time frame (expiration date).
Example:Â Sarah, a young investor, believes a certain stock has the potential to increase in value. She buys a call option on the stock, giving her the right to buy it at a specific price by a certain date. If the stock price goes up above the strike price, she can exercise the option and make a profit. However, if the stock price stays below the strike price, the option expires worthless.
Call Auction:
Definition:Â A short period at the beginning and end of a trading session on an exchange where buyers and sellers submit orders to buy and sell securities. The price is determined by matching the highest bid with the lowest asking price.
Example:Â A stock exchange facilitates a call auction at the opening and closing of the trading day. This helps determine the fair market value of the securities based on supply and demand.
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