Bullish options strategy
Long call
Pay a premium for the right to buy 100 shares at the strike. Profits if the stock rises enough, fast enough.
BullishLow IV (buying cheap premium)Defined riskLevel 3 · Buying options
Long call payoff
An example on a $100 stock with 30% implied volatility. The dashed line is the profit or loss at expiry; the solid line is what the position is worth today.
The trade
Buy 1 $98 call · 45 days · $5.51
Net debit $551
Max profitUnlimited
Max loss−$551
Break-even$103.51
Chance of profit37%
How it works
- You buy one call. The most you can lose is what you paid.
- At expiry you profit above strike + premium paid (the break-even).
- Before expiry the call also loses value every day (theta), so the stock has to move soon.
When to use it
- You expect a sizeable move up within a known time frame.
- Implied volatility is low, so the option is cheap compared with how much the stock usually moves.
Managing the trade
- Buy more time than you think you need. 45-90 days lets you be right a little late.
- Higher-delta calls (0.60-0.70) behave more like stock and lose less to time decay than cheap out-of-the-money calls.
- Take profits early: many traders close at 50-100% gain rather than holding to expiry.
Risks
- Losing the whole premium if the stock doesn't rise above the strike.
- Volatility falling after you buy (e.g. after earnings) cuts the price even if the stock rises.