If I have bought the Call Option: it means, I have the right to ‘buy’ the underlying at the predetermined price when I want, if I want.
If the price of the underlying in the local (cash) market is lower than the pre-determined price, I will not exercise my right to buy. I will leave the Call option to just expire. (We are not taking premium into account currently)
Example:
I have bought the call option:
Call Option to buy share of ABC @ INR 50.
Underlying: Shares of ABC
Strike Price: INR 50
Price of the underlying in the local (cash) market is lower, say INR 40.
In this case, I will not use my Call Option – as the price of the underlying (Shares in this case), is lower in the cash market, hence I will prefer to buy from the local (cash) market – leaving my call option to just expire.
Note: Please watch the video below on “Call Option as Financial Leverage”