Posted on October 15, 2010 by Rich Browne

The buyer of a call option is in the so-called long-call position, he pays an option premium and it is calculated in a specific way. A zero-strike call or standard tracker relates to a call option with strike price zero of the underlying referenced. In contrast to the investment in a stock, the investor receives no dividend.

With zero strike calls on indices, this can be different as different indices include dividends or interest. Another difference from the direct investment in a stock is that it limits the duration that a call option implies.

A zero-strike call can be constructed in several ways which include the seller (or issuer) of the zero-strike call holding the underlying and thus anticipating a rise in dividend payments. The positive change in the dividend payment means he reaps a profit.

The seller (or issuer) of the zero-strike call buys and sells call options with different levers. With the remaining money, he buys a zero bond. In this design, the purchased call option, has an increase of at least one lever as the sold call option.

Call options can be bought on various financial instruments apart from a corporation stock. While options can be acquired on futures on interest rates, and commodities such as crude oil. A trade-able call option differs from incentive stock options and a warrant.