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Transcript
00:00Now here's an example of a call option. Let's say that you and a friend go to Toys R Us and you find
00:04a toy that you really want to buy, like this Moogle toy, and it costs $10. But you only have
00:09$1 in your pocket. So your friend feels really bad for you and they offer you a deal. They tell
00:14you that they will buy the toy for you and they will hold it for exactly one week and in exchange
00:20they want the dollar that's in your pocket. Why this is great is because if next week Toys R Us
00:25decides to double the price of this toy to $20, you could still buy it for that original $10 price
00:32and you'll have made a $10 profit. But if this toy drops in price and Toys R Us starts to charge
00:39$5, you don't have to buy the toy back from your friend at all. But in exchange, your friend gets
00:46to keep the dollar that you gave them. Now in technical stock terminology, that $1 is called
00:52the premium. So that's really a call option. It's just an easy way to bet on something going
00:56up in price for cheaper.
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