## What is the value of a call or put option?

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**Call**option represents the right (but not the requirement) to purchase a set number of shares of stock at a pre-determined 'strike price' before the option reaches its expiration date. A call option is purchased in hopes that the underlying stock price will rise well above the strike price, at which point you may choose to exercise the option. Exercising a call option is the financial equivalent of simultaneously purchasing the shares at the strike price and immediately selling them at the now higher market price.A

**Put**option represents the right (but not the requirement) to sell a set number of shares of stock (which you do not yet own) at a pre-determined 'strike price' before the option reaches its expiration date. A put option is purchased in hopes that the underlying stock price will drop well below the strike price, at which point you may choose to exercise the option.
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Any rate of return entered into the interactive calculator to project future values should be a reasonable average return for the period. Rates of return will vary over time, and generally the higher the rate of return the higher the degree of risk.

Any rate of return entered into the interactive calculator to project future values should be a reasonable average return for the period. Rates of return will vary over time, and generally the higher the rate of return the higher the degree of risk.