Call Over

"It's not over until the fat lady sings," says the old baseball or opera expression (depending on whom you ask). The call over is the act of the fat lady singing, at least in a part of the options market.

In call options trading, a buyer is predicting that the price of an underlying asset (such as a stock) will go up. He or she has the right, but not the obligation, to exercise the option when the stock hits a previously agreed upon price known as the "strike price." When the last trading day arrives before the option expires, the buyer must decide whether to exercise it (buy the shares) or let it expire. He or she would let it expire if the current market rate was lower than the option strike price. In either case, the call is over.

As just one example of a call option deal, let's say Peter owns 25,000 shares of Call Me Successful, Inc. that are valued at $3.75 a share. Looking at the general direction of the market, he starts to worry that the price could go down. So he decides to protect himself and sells a call option to Tom, who thinks the price will go up. Their contract states that Tom will buy Peter's 25,000 shares six months from now at $4.75. When the price of Call Me Successful goes down to $3.50 when the six months are up, Tom decides to let the option expire since he can buy the shares cheaper in the open market. The call is over.