A call option gives the holder (buyer/ one who is long call), the right to buy a specified quantity of the underlying asset at the strike price on the expiration date. The seller (one who is short call) however, has the obligation to sell the underlying asset if the buyer of the call option decides to exercise his option to buy. Example: An investor buys One European call option on Stock “A” at the strike price of $35.00 at a premium of $1.00. If the market price of Stock “A” on the day of expiry is more than $35.00, the option will be exercised. The investor will earn profits once the share price crosses $36.00 (Strike Price + Premium i.e., $35.00+$1.00). Suppose stock price is $38.00, the option will be exercised and the investor will buy 1 share of Stock “A” from the seller of the option at $35.00 and sell it in the market at $38.00 making a profit of $2.00 {(Spot price – Strike price) – Premium}. In another scenario, if at the time of expiry stock price falls below $35.00 say suppose it touches $30.00, the buyer of the call option will choose not to exercise his option. In this case the investor loses the premium ($1.00), paid which shall be the profit earned by the seller of the call option.