Call Options give the holder the right, but not the obligation, to buy an underlying share at a predetermined price (called the exercise price) on or before the expiry date.
Example
BHP Billiton (BHP) shares are trading at $40.00. John chooses to buy an American-style three month Call Option over 2,000 shares with an exercise price of $40.00. As the buyer of this contract John has the right, but not the obligation, to buy 2,000 BHP shares for $40.00 per share at any time until the expiry date. For this right, John pays a premium (or purchase price) to the seller of the Option, which in this case is Commonwealth Bank. To take up this right to buy the BHP shares at the specified price John must exercise the Option on or before expiry.
On the other hand the Commonwealth Bank as seller of this Call Option is obliged to deliver 2,000 BHP shares at $40.00 per share if John exercises the Option. For accepting this obligation the bank receives and keeps the Option premium whether the Option is exercised or not.