Let's imagine you have a strong feeling a particular stock is about to move higher. You can either purchase the stock, or purchase 'the right to purchase the stock', otherwise known as a call option. Buying a call is similar to the concept of leasing. Like a lease, a call gives you the benefits of owning a stock, yet requires less capital than actually purchasing the stock. Just as a lease has a fixed term, a call has a limited term and an expiration date.
Example: Let's look at an example option. Microsoft (MSFT) is trading at $55.00, it would take $55,000 to buy 1000 shares of the stock. Instead of purchasing the stock you could purchase a MSFT "call option" with a strike price of 55 and an expiration 1 month in the future. For instance, in May you could Buy 10 MSFT JUN 55 Calls for $2.50. This transaction will enable you to participate in the upside movement of the stock while minimizing the downside risk of purchasing
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