By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyse site usage, and assist in our marketing efforts. View our Privacy Policy for more information.
Capital at risk. All investments carry a varying degree of risk and it’s important you understand the nature of these. The value of your investments can go up or down and you may get back less than your original investment. Options are complex products and not suitable for all investors. Please review Characteristics and Risks of Standardized Options prior to engaging in options trading. Fees may apply

Long Calls (Buying Calls)

A long call involves buying a call option, granting the right to purchase an underlying asset at a set price before or on a specific date. It's used by investors seeking to potentially profit from the underlying asset value increasing without owning it. Be mindful, options are considered high risk investments due to their complex nature.

Written by

Ross Lynch

Published on

20th September 2023
Subscribe to our newsletter
By subscribing to our newsletter you're confirming that you agree to our privacy policy.

Following on from part one, here is a breakdown of long calls. If you’d like to check out part one: Options Terminology


Firstly, what is a long call? The purchase of a call option


A call option gives the buyer the right but not the obligation to buy a specified quantity of an Underlying Asset, such as 100 Apple shares, at a pre-agreed price (Strike Price) before or on a specific date (Expiration Date)


Calls are commonly used by investors seeking to potentially profit if the Underlying Asset value increases, without owning the asset


Example:


Apple shares are trading at $170.00

I can buy an Apple $175.00 (Strike Price) Call for $3.00 (Premium) that expires on 16th June (Expiration Date)


The contract contains 100 shares, resulting in a total premium of $300.00


To breakeven, Apple would need to increase to $178.00 (Strike Price + Premium) by expiration and anything above this would be considered profit


By expiration, if Apple’s shares are trading at $190.00, I have the right to buy 100 shares for $175.00 each


If I exercise my right to buy the shares for $175.00 and then sell them for $190.00, I have made $15.00 on each share


I have made $15.00 but paid $3.00 Premium for the call, so my profit is $12.00 on each share


Total Proceeds: $1,500.00

Total Premium: $300.00

Total Profit: $1,200.00


Remember! When investing you may incur additional costs such as broker and exchange fees.

Get notified when we go live