Groundlearn / Glossary / Call option
Call option
A CFA and FRM term, defined in plain English with the distinction examiners test.
What it means
The right, without the obligation, to buy an asset at the strike price by expiry.
The exam angle
The buyer’s loss is capped at the premium; the naked writer’s loss is unbounded. That asymmetry drives most option exam questions.
Where it appears in the syllabus
- DerivativesCFA Level I · exam weight 6–9% · Forwards, futures, swaps, options and arbitrage-free pricing.
- Valuation & Risk ModelsFRM Part I · exam weight 30% · VaR and ES, option valuation, bond risk, stress testing, credit and op risk.
Related terms
- Black–Scholes–Merton modelA closed-form model for European option prices, assuming lognormal prices, constant volatility and continuous…
- DeltaThe change in an option’s value for a small change in the underlying price.
- Lognormal distributionThe distribution of a variable whose natural logarithm is normally distributed.
- Put optionThe right, without the obligation, to sell an asset at the strike price by expiry.
- Put–call parityThe no-arbitrage relationship linking a European call, a European put, the underlying and a risk-free bond of the same…
- Basis riskThe risk that a hedge and the exposure it hedges do not move together, leaving a residual.
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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