Call option

A call protects a buyer against an increase in the underlying price while allowing the option to lapse if buying in the market is cheaper. At expiry, a simple call's intrinsic payoff per unit is max(underlying price − exercise price, 0). Deduct the premium and relevant costs to calculate the holder's net profit. Before expiry, time value can make the option worth more than its immediate exercise payoff. In currency and interest-rate hedging, identify what the contract's underlying actually is before choosing a call.