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Profit and loss distribution chart of call options and futures.
Buying a call option means that the buyer pays a premium and obtains the right to buy a certain number of specific commodities from the option seller at a specific price. When an investor expects the market price of a specific commodity to rise, he can pay a certain premium to buy a call option.

Traders can buy call options on futures contracts related to them. Once the prices of commodities or assets rise, they can exercise call options and buy futures contracts at a lower strike price.

Then, the futures contract is sold at a high price according to the rising price, and there is a surplus after making up the paid royalties, which can make up for the losses caused by buying goods at a high price due to rising prices; You can also sell options directly at a high price and get royalties, which can play a role in maintaining value.

If the price of a commodity or asset falls instead of rising, the trader can give up exercising the option, which will only bring a little loss of royalties, which can be made up by the income from buying the commodity or asset at a low price.

Compared with hedging futures contracts directly in the futures market, this trading method is less risky and more flexible. For traders, buying a call option is actually equivalent to setting a maximum buying price, which can lock in the risk and ensure that traders can get the benefits brought by the price drop.