A long call is when you buy a call option, betting the stock will rise above your breakeven point by expiration.
How It Works
Apple at $150:
- Buy a $150 call for $5 ($500 total)
- Breakeven: $155 ($150 strike + $5 premium)
If stock rises to $160, your call is worth at least $10. You make $5 ($500 profit) minus commissions.
If stock falls to $140, your call expires worthless and you lose $500.
Risk Profile
Maximum Loss: Premium paid ($500)
Maximum Profit: Unlimited (stock can rise forever)
Breakeven: Strike price + premium paid
Why Use It
- Limited risk (you can only lose the premium)
- Unlimited profit potential
- Leverage (control 100 shares for less money than buying stock)
- Works for any bullish outlook
Challenges
- Time decay (theta) works against you
- Need bigger moves to profit than if you owned stock
- IV crush after earnings destroys value
- Most long calls expire worthless
When to Use
- Before catalysts when big moves expected
- When stock is breaking resistance
- When entry cost is low relative to target
- When you have high conviction
Related: Long Put, Bull Call Spread, Buying vs Selling
