 Options can be further divided into two types the first is call option and the second is termed as a put option. A call option is such a contract that gives its owner a right to purchase an underlying asset at a fixed price during a particular period of time. Now there is no restriction of any type on any class of asset to be traded under such type of contract but most commonly traded options on different exchanges include options on common stocks and bonds of corporate firms. Let's see an example to understand how a call option works. There is a date April 1 on this date an investor has a call to buy 100 shares of common stock of IBM on R before September 19 at an exercise price of $100 per share. Now if the stock price on that particular date September 19 is $130 per shares then the buyer has a right to exercise this call at a exercise price of $100. Now this means that the value of this right given to the buyer under the call option is worth at $30 per share on the date of expiry. That means that the value of the call depends on the value of the underlying stock or the underlying asset. In our example the value of our call will be rising as there is a rise in the stock price of the IBM company. If stock price is greater than the exercise price the call is termed as in money. This means that it is not advantageous for the holder of the call to exercise it and if the stock price is less than the exercise price then the call is out of the money and it is worthless to exercise the right. In this case the value of the call option is equal to zero and the holder of the call will walk away from the contract. There is never a case of negative value for our call because in this case there is a concept of then a limited liability. So this call is now is not treated as a limited liability instrument and the holder of this call loses just up to the initial amount he has invested in buying the call. And if we draw the shape graphically the value of the call we will see that it looks like a hockey curve. So we will see that a hockey stick diagram can be there for our call option contract. We have another example. Let's see Mr. A holds a one-year European call contract on a common stock of corporate firm that is TIX. This call can be exercised on the expiry date at $150 per share and on the expiry date if the common stock of the company is trading at $200 per share then buying at $150 and selling instantly the share at $200 each will yield $50 for the holder of the call as a profit but if the selling price of the share comes to $100 at the date of expiry then though Mr. A still holds the call option but he will throw it out he will walk away from the contract as the value of the share of this company is equal to zero. So call value is equal to zero in this particular case because the holder of the call is not exercising any right because there is no gain for him to exercise this right.