Long Call
A bullish, defined-risk strategy with unlimited upside · payoff at expiration
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Worked example
Buy 1 × $100.00 call for $5.00 per share — a $500.00 debit, which is also the most you can lose (max loss -$500.00). The position breaks even at $105.00 (strike + premium); above that it profits dollar-for-dollar with the stock.
At expiration: if the stock is at $120.00, the position shows a net P&L of $1,500.00; if the stock is at $100.00, the position shows a net P&L of -$500.00.
When to use
- You expect the underlying to rise meaningfully before expiration.
- You want defined, limited risk — the most you can lose is the premium — with uncapped upside.
- You prefer leverage to buying the shares outright for the same directional view.
Common pitfalls
- Time decay works against you: the option loses value as expiration nears if the stock doesn't move.
- You can lose the entire premium even on a rise, if the stock finishes below the breakeven.
- A drop in implied volatility can erode the option's value even when the stock moves your way.