Name: Long Call

Description: The long call gives the buyer the right to purchase the stock at the strike price.  You want to buy a call if you believe the price of the underlying is going to go up.  Calls offer insurance over buying the stock outright since you can only lose the price of the call (risk is capped).  Be careful buying out of the money calls as they usually expire worthless.

Setup: Buy (long) a call

Bias: Bullish

Break-Even: Strike + Price paid for call

Max Profit: Unlimited: Looking for the underlying to go as high as the sky

Max Loss: Limited: Price paid for the call

Margin: No margin needed since call is bought outright

Time Decay: As time passes the call will drop in value.  To offset rapid time decay typically call options are purchased 60-150 days from expiration.

Implied Volatility: Over the life of the option you want implied volatility to increase, thus increasing the price of your option.  A decrease in implied volatility will lower the price of your option.

Notes: Purchasing calls deep out-of-the-money because they are cheap will typically result in losses.

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