Options Strategies - Long Call

This strategy consists of buying a call option. Buying a call is for investors who want a chance to participate in the underlying stock's expected appreciation during the term of the option.

The investor buys calls as a way to profit from growth in the underlying stock's price, without the risk and up-front capital outlay of outright stock ownership. The smaller initial outlay also gives the buyer a chance to achieve greater percentage gains (i.e., greater leverage).

Specifications Description
Market ExpectationMarket bullish/volatility bullish. The more bullish the expectation, the further out-of-the-money (higher strike) the purchased call should be. A Long Call combines limited downside exposure with high gearing in a rising market
ProfitUnlimited in a rising market
Loss Limited to the initial premium
Breakeven Point Reached when the underlying rises above the strike price A, by the same amount as the premium paid to establish the position. Breakeven point = Exercise price (K) + premium (c)
ExampleBuy a Call ATM 100
Price at Expiry Var (%) c(100) Performance (%)
80.00 -20.00 -3.61 -100.00
85.00 -15.00 -3.61 -100.00
90.00 -10.00 -3.61 -100.00
95.00 -5.00 -3.61 -100.00
100.00 0.00 -3.61 -100.00
105.00 5.00 1.39 38.34
110.00 10.00 6.39 176.67
115.00 15.00 11.39 315.01
120.00 20.00 16.39 453.35