Long Call Strategy
Buy a call option to profit from rising stock prices with limited risk.
What is a Long Call?
A Long Call is the simplest bullish options strategy. You buy a call option, giving you the right to purchase 100 shares of a stock at a specific strike price before expiration. Your maximum loss is limited to the premium paid, while your upside is theoretically unlimited if the stock rallies significantly.
When to Use a Long Call
Use a Long Call when you strongly believe a stock will move up significantly before expiration. It's ideal for capturing upside leverage with defined downside risk. Best when implied volatility is low (cheaper premiums) and you expect a big directional move.
Key Formulas
- Max Profit
- Unlimited (stock price minus strike minus premium, at expiration)
- Max Loss
- Premium paid × 100 (per contract)
- Breakeven
- Strike price + Premium paid
Example Trade
Buy 1 AAPL $190 Call for $5.00. Max loss: $500. Breakeven: $195. Profit above $195, unlimited upside.
Common Mistakes to Avoid
- Buying too far OTM (low probability of profit)
- Holding too close to expiration (theta decay accelerates)
- Ignoring implied volatility (buying during high IV)
- Not having a clear profit target or exit plan
Related Strategies
Frequently Asked Questions
What is a Long Call?
A Long Call is the simplest bullish options strategy. You buy a call option, giving you the right to purchase 100 shares of a stock at a specific strike price before expiration. Your maximum loss is limited to the premium paid, while your upside is theoretically unlimited if the stock rallies significantly.
When should I use a Long Call?
Use a Long Call when you strongly believe a stock will move up significantly before expiration. It's ideal for capturing upside leverage with defined downside risk. Best when implied volatility is low (cheaper premiums) and you expect a big directional move.
What is the maximum profit and loss for a Long Call?
Max profit: Unlimited (stock price minus strike minus premium, at expiration). Max loss: Premium paid × 100 (per contract).
What is the breakeven price for a Long Call?
Breakeven: Strike price + Premium paid. Example trade: Buy 1 AAPL $190 Call for $5.00. Max loss: $500. Breakeven: $195. Profit above $195, unlimited upside.
What are common mistakes when trading a Long Call?
Common mistakes include: Buying too far OTM (low probability of profit); Holding too close to expiration (theta decay accelerates); Ignoring implied volatility (buying during high IV); Not having a clear profit target or exit plan.
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