What are options? A call option as its name implies gives you the right but not the obligation to do something. Let's take an example. Assume the current value of Apple's stock price is $150 and today's date is June 8th. You expect a rise in price for the stock. You decide to purchase a call option on it today. This call option has a strike price of 160 and expires on June 30th. (That is 22 days from your purchase date). The market price of that call option is $100. This is the premium for a call option to buy 100 shares of Apple's stock on June 8th . Let's discuss the meaning of the word strike. What does the strike price represent? Assume we made that purchase and after the stock market closes on June 30th the price of Apple's stock is $200. The strike price is the price at which, you, the owner of the call option have the right (but not the obligation) to buy Apple's stock. In this case you have the option to purchase 100 shares of Apple's stock at $160. The time to expiration was 2 days when you purchased the call option. So on the expiration date, with one call option, for which you paid $100 you can purchase 100 shares of APPL at $160 worth $200. Your total gain for this transaction would be $40*100 - $100 = $3900. Alternatively, let's assume that on the expiration date, June 30th, the new share price is not 200 but $120. In that case you still have the option of purchasing the 100 shares at $160 but you would not. Because you can just go buy as many shares as you want at $100. Therefore your call option would expire worthless and you would lose all your premium. That means you would have a loss of $100 in our example