Definition: A call option is a type of option on Futures. It gives you the right to purchase a futures contract at a designated strike price. In the commodity markets, it is considered a lower risk way to trade the markets. When you buy a call option, your risk is limited to the price you pay for the call option (premium) plus any commissions and fees.

Most traders do not exercise call options (or convert into a futures contract), instead they will close a call option sometime before it expires.

You can also sell (or write) call options. This process exposes the option writer to virtually unlimited risk. You are essentially taking the other side of the trade that a buyer of a call option makes.

Also Known As: calls