The right to buy
a specific number of shares at a specified price by a fixed date.
For example, buying one ABC
December 50 Call entitles you to buy one lot (100 shares) of ABC at 50 from now until
it expires in December regardless of what ABC is actually trading at. Therefore,
when ABC is trading above 50, the call option has intrinsic, real value.
When ABC is trading below or at 50, the option has no real value, but may
have trading value based solely on speculation.