For example you might purchase a call option on 100 shares of a stock if you exp

For example you might purchase a call option on 100 shares of a stock if you
expect the stock price to increase but prefer not to tie up your investment
principal by investing in the stock. If the price of the stock does go up the
call option will increase in value.You might choose to sell your option at a profit or exercise the option and
buy the shares at the strike price. But if the stock price at expiration is less
than the strike price the option will be worthless. The amount you lose in
that case is the premium you paid to buy the option plus any brokerage
fees.In contrast you can sell a call option which is known as writing a call.
That gives the buyer the right to buy the underlying investment from you at the
strike price before the option expires. If you write a call you are obliged to
sell if the option is exercised and you are assigned to meet the call.