Call Option: The Right to Buy a Stock at a Fixed Price, Without the Obligation
Last updated: October 2026
A call option is a contract that gives the buyer the right, but not the obligation, to purchase a stock or other asset at a predetermined price (the strike price) within a set time frame. Singapore traders use call options to speculate on a stock rising, or to generate income by selling them against shares they already own.
Not financial advice. All figures for educational reference only. Data as at October 2026.
Key Takeaways
- A call option buyer pays a premium for the right to buy the underlying asset at the strike price before the option expires.
- If the stock price stays below the strike price at expiry, the call option typically expires worthless, and the buyer’s maximum loss is limited to the premium paid.
- Singapore investors most commonly trade call options on US stocks and ETFs via brokers like Interactive Brokers (IBKR), since SGX’s own options market has far fewer listed names than the US.
- Selling (“writing”) covered calls against shares already owned is a common income strategy, generating premium income in exchange for capping the upside if the stock rallies hard.
- Options trading in Singapore requires a specific account approval tier from the broker, and is generally considered higher-risk than straightforward stock or ETF investing.
What Is Call Option?
A call option is one of the two basic building blocks of options trading, alongside the put option. Buying a call option is a bet that the underlying stock will rise above the strike price before the option’s expiry date. If it does, the option can be exercised to buy the stock at the lower strike price, or more commonly, the option itself can be sold for a profit without ever taking delivery of the shares.
Every option contract has three key components: the strike price (the fixed price at which the stock can be bought), the expiry date (after which the option is worthless if not exercised), and the premium (the price paid upfront to buy the option, which is non-refundable regardless of outcome).
In Singapore, retail interest in call options has grown alongside the popularity of US stock investing, since many of the most actively traded options globally — on stocks like Apple, Tesla, and Nvidia, or on index ETFs like the SPY — are US-listed rather than SGX-listed. SGX does offer its own structured warrants and options on select blue-chip counters and indices, but with much lower liquidity than the US market.
It is worth distinguishing a call option from a structured warrant, a product more familiar to long-time SGX investors. Both give exposure to a stock’s upside with a smaller upfront cost than buying the shares outright, but a structured warrant is issued and backed by a bank, trades directly on the SGX order book in Singapore dollars, and typically has a shorter typical holding period focus, while a listed call option is a standardised contract traded on an options exchange (most commonly in the US for SG retail investors), with standardised strike prices and expiry dates set by the exchange rather than an issuing bank.
How Does Call Option Work in Singapore?
Singapore investors typically access call options through brokers offering US options trading, since this is where liquidity and strike price selection are richest. The table below summarises the main access routes:
| Access Route | Market Covered | Notes for SG Investors |
|---|---|---|
| Interactive Brokers (IBKR) | US options (most SGX-friendly route) | Widely used by SG retail traders for US options access |
| Tiger Brokers / moomoo | US and some SG/HK options | Lower commissions, growing options support |
| SGX structured warrants/options | Selected SGX blue chips and indices | Lower liquidity than US market |
| Local full-service brokers | SGX and limited US access | Often requires in-person account upgrade |
Source: General broker feature comparisons for Singapore retail investors; confirm current offerings directly with each broker.
Brokers require investors to pass a suitability assessment and select an options trading tier before being allowed to buy or sell call options, reflecting MAS’s requirement that complex investment products be matched to an investor’s experience and risk tolerance.
Call Option Example
Suppose a Singapore investor believes a US-listed stock currently trading at USD 100 will rise over the next two months. They buy one call option contract (covering 100 shares) with a strike price of USD 110, expiring in 60 days, paying a premium of USD 3 per share (USD 300 total for the contract).
- If the stock rises to USD 120 before expiry, the option is worth at least USD 10 per share (USD 1,000 for the contract) — a profit of about USD 700 after the USD 300 premium paid.
- If the stock stays at or below USD 110 at expiry, the option expires worthless, and the investor loses the full USD 300 premium — but no more than that.
This illustrates the asymmetric risk profile of buying call options: losses are capped at the premium paid, while gains are theoretically unlimited if the stock keeps rising.
Advantages of Call Option
Losses are capped for buyers. A call option buyer can never lose more than the premium paid, no matter how far the stock falls, which is a very different risk profile from buying the stock outright on margin.
It offers leverage. A relatively small premium can control exposure to 100 shares per contract, meaning gains (as a percentage of capital deployed) can be much larger than simply buying the stock, though the same leverage magnifies percentage losses too.
It can generate income. Singapore investors who already own shares can sell (“write”) covered calls against them to collect premium income, a popular strategy among dividend and REIT investors looking to boost portfolio yield.
It allows targeted bets. Call options let a trader express a specific view (e.g., “this stock rises above X by Y date”) with defined risk, rather than taking an open-ended stock position.
Risks and Limitations
Time decay works against buyers. An option loses value as it approaches expiry if the stock has not moved favourably, a factor known as theta decay, meaning a buyer can be right about direction but still lose money if the move happens too slowly.
It is possible to lose 100% of the premium. Unlike a stock, which can recover in value even after falling, a call option that expires out of the money is worth exactly zero — there is no partial recovery.
Selling uncovered calls carries unlimited risk. While buying a call option has limited risk, selling (“writing”) a call option without owning the underlying shares exposes the seller to theoretically unlimited losses if the stock rallies sharply.
It requires active monitoring. Options have expiry dates and can move quickly, making them less suitable for a passive, buy-and-hold approach than simply owning the underlying stock or an ETF.
Call Option: Comparison
| Aspect | Call Option | Put Option |
|---|---|---|
| Right granted | Right to buy at strike price | Right to sell at strike price |
| Buyer profits when | Stock price rises above strike | Stock price falls below strike |
| Typical use | Bullish speculation or covered call income | Bearish speculation or portfolio hedging |
| Maximum loss (buyer) | Premium paid | Premium paid |
| Maximum gain (buyer) | Theoretically unlimited | Capped at strike price (stock can’t go below zero) |
Source: Standard options terminology as commonly taught in retail options education materials.
The Bottom Line
For Singapore investors, a call option is a flexible but higher-risk tool: it can be used cautiously as a covered-call income strategy on shares already owned, or aggressively as a leveraged, capped-risk bet that a stock will rise. Either way, it requires understanding time decay and strike price selection well before committing real money, and most Singapore brokers require passing a suitability check before enabling options trading.
Frequently Asked Questions
Can Singapore investors trade call options on SGX stocks directly?
SGX offers structured warrants and options on a limited set of blue-chip stocks and indices, but liquidity is thinner than the US market, so most active SG options traders use brokers offering US options instead.
What happens if I don't sell or exercise my call option before it expires?
If the option is out of the money (stock below strike) at expiry, it simply expires worthless and the premium is lost. If it is in the money, most brokers will automatically exercise it unless instructed otherwise, so investors should check their broker’s specific policy.
Is buying a call option riskier than buying the stock itself?
In terms of the percentage of capital at risk per trade, options can be riskier because of leverage and time decay, even though the dollar amount at risk (the premium) is smaller and clearly capped.
What is a covered call?
A covered call is selling a call option against shares you already own. It generates premium income but caps your potential gain if the stock rallies above the strike price, since you would be obligated to sell your shares at that price.
Do I need special approval to trade call options in Singapore?
Yes. Brokers are required to assess suitability and assign an options trading tier before allowing clients to buy or sell options, in line with MAS requirements for complex investment products.
