In this strategy, the investor has the right to buy the asset in the future at a predetermined strike price i.e., strike price (K) and the option seller has the obligation to sell the asset at the strike price (K). If the settlement price (underlying stock closing price) of the asset is above the strike price, then the call option buyer will exercise his option and buy the stock at the strike price (K). If the settlement price (underlying stock closing price) is lower than the strike price, the option buyer will not exercise the option as he can buy the same stock from the market at a price lower than the strike price.
