Long Call Stratergy

The long call option strategy is a bullish options trading strategy with a theoretical unlimited profit and a limited loss. Buying call options creates a long position on an underlying asset and limits net downside exposure.

Trade

-Buy 1 call option

Note: like most options strategies, calls can be purchased in-the-money (ITM), at-the-money (ATM), or out-of-the-money (OTM).

Tip : If you want to buy calls, do not buy deep ITM or deep OTM call options. The bid/ask spread is too wide. Better is to buy ATM, slightly ITM or slightly OTM call

Trade Example

-Stock XYZ is trading at $28 a share.
-Buy 29 call for $0.80

Profit and Loss Diagram

Long Call Summary

Break Even PriceStrike Price + Premium Paid
Maximum
Profit
Unlimited because stock can go to infinity, at least in theory
Maximum Profit ScenarioStock rises meteorically beyond the break even price
Maximum
Loss
Limited to initial premium paid
Maximum Loss ScenarioStock stays lower than break even price
Why TradeIf you want to get leveraged bullish exposure to a stock at lower investment as compared to owning the stock outright
When to TradeStock Assumption : Very Bullish
Volatility : When volatility is low, so you pay less premium to enter the trade
When to CloseThere is no set profit target.
Legs1 leg
Passage of timeNegative.
With passage of time, the value of this option decreases
Increase in volatilityPositive.
With increase in volatility, the value of option increases
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