Long Call Strategy
The long call is the most fundamental bullish options strategy. Buy a call option to profit from rising stock prices with limited downside risk equal to the premium paid.
What is Long Call Strategy?
Long Call Strategy is the simplest bullish options strategy where you buy a call option, giving you the right to purchase 100 shares at the strike price before expiration.
Long calls offer leveraged upside exposure with risk limited to the premium paid. They are often the first strategy new options traders learn.
TL;DR - Quick Summary
Long Call = Buy 1 call option. You profit when the stock rises above the strike price plus the premium paid. Max loss is limited to the premium. Max profit is theoretically unlimited as the stock rises.
What is a Long Call?
A long call is the most basic bullish options strategy. You buy a call option, which gives you the right (but not the obligation) to purchase 100 shares of the underlying stock at the strike price before the option expires.
Why use a long call instead of buying stock? Leverage and defined risk. A call option might cost $3-5 per share while the stock costs $100+. If the stock rises 10%, your call might gain 50-100%. If the stock drops, you can only lose the premium paid.
Example: Stock trading at $100. You buy a $105 call for $3.00 ($300 total). If the stock rises to $120 by expiration, your call is worth $15.00 ($1,500). That's a 400% return on your $300 investment, while the stock only gained 20%.
How the Long Call Works
Setup
- Action: Buy 1 call option
- Direction: Bullish (you expect the stock to go up)
- Cost: Premium paid (debit trade)
- Max profit: Unlimited (stock can rise indefinitely)
- Max loss: Premium paid (limited, defined risk)
- Breakeven: Strike price + premium paid
Strike Selection
In-the-money (ITM): Higher cost, higher probability of profit, lower leverage. Best for conservative traders or replacing stock positions.
At-the-money (ATM): Moderate cost and probability. Most popular choice for balanced risk/reward.
Out-of-the-money (OTM): Lowest cost, lowest probability, highest leverage. Best for speculative bets with defined risk.
Risk Management
The biggest risk with long calls is time decay (theta). Every day, your call loses value as expiration approaches. To manage this:
- Buy with at least 45-90 days to expiration to slow time decay
- Don't risk more than 2-5% of your account on a single trade
- Set a stop loss at 50% of premium paid
- Take profits at 50-100% gains rather than holding for max profit
- Watch implied volatility - high IV means expensive premiums
Key Takeaways
- Long call = buy a call = bullish bet with limited risk
- Max loss is the premium paid, max profit is unlimited
- Best entry: low IV, 45-90 DTE, ATM or slightly OTM strike
- Manage time decay by choosing adequate expiration
- Consider debit spreads to reduce cost at the expense of capped gains
Related Options Strategies
Bull Put Spread
Alternative bullish strategy that collects premium with defined risk.
Covered Call Strategy
Combines stock ownership with call selling for income.
Debit Spread
Reduces cost of a long call by selling a higher-strike call.
Understanding related strategies helps you choose the best approach for your market outlook and risk tolerance. Each strategy has unique characteristics that make it suitable for different market conditions.
Your Learning Path
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