Long Call The Strategy A long call gives you the right to buy the underlying stock at strike price A.
Calls may be used as an alternative to buying stock outright. You can profit if the stock rises, without taking on all of the downside risk that would result from owning the stock.
It is also possible to gain leverage over a greater number of shares than you could afford to buy outright because calls are always less expensive than the stock itself.
But be careful, especially with short-term out-of-the-money calls. If you buy too many option contracts, you are actually increasing your risk.
Options may expire worthless and you can lose your entire investment, whereas if you own the stock it will usually still be worth something. Except for certain banking stocks that shall remain nameless. You can learn more about delta in Meet the Greeks. Try looking for a delta of.
In-the-money options are more expensive because they have intrinsic value, but you get what you pay for. Break-even at Expiration Strike A plus the cost of the call. The Sweet Spot The stock goes through the roof.
Maximum Potential Loss Risk is limited to the premium paid for the call option. Work with options strategy Invest Margin Requirement After the trade is paid for, no additional margin is required. As Time Goes By For this strategy, time decay is the enemy.
It will negatively affect the value of the option you bought. Implied Volatility After the strategy is established, you want implied volatility to increase. Use the Technical Analysis Tool to look for bullish indicators.