A Call option gives the buyer of the option the right to buy the underlying stock at the Strike Price until the Expiration Date.  The buyer of a call is bullish on the stock.  Suppose you think Microsoft will undergo a rejuenation in the first 6 months after Bill Gates retired.  On June 27, 2008, Microsoft closed at 27.63 and you could have bought 100 shares for $2763.  Suppose that in 6 months, the stock increases by 15%.  The stock would be worth 31.77 and you would have a 15% gain or $414 on an investment of $2763.  Not bad for half a year.
Now let us look at what you could do with a Call option.  You could buy a Call option with a Strike of 27.50 that will expire on January 16, 2009 for a Premium of 2.70.  If Microsoft made the same 15% gain to 31.77, the option would be worth the Stock Price, less the Strike Price, less the Premium paid:  31.77-27.5-2.70 = 1.57.  This is a profit $157 on an investment of $277 or 58%.  If you had invested the same $2763 that you invested on the stock itself, you could have bought 10 option contracts and made a profit of $1570.

Option Strategies. Is a listing of the various ways to use option.
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