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Long Call

The long call is the simplest strategy in options trading and involves the purchase of a call option. The options trader employing the long call strategy believes that the price of the underlying stock will go up beyond a certain price within a certain period of time.

Leverage

Compared to buying the shares outright, the call buyer is able to gain leverage since the lower priced calls appreciate in value faster percentagewise for every point rise in the price of the underlying stock

Unlimited Profit Potential

Since they can be no limit as to how high the stock price can be at expiration date, there is no limit to the maximum profit possible when implementing the long call strategy.

The formula for calculating profit is given below:

• Maximum Profit = Unlimited
• Profit Achieved When Price of Underlying >= Strike Price of Long Call + Premium Paid
• Profit = Price of Underlying - Strike Price of Long Call - Premium Paid

Limited Risk

Risk for the long call strategy is limited to the price paid for the call option no matter how low the stock price is trading on expiration date.

The formula for calculating maximum loss is given below:

• Max Loss = Premium Paid + Commissions Paid
• Max Loss Occurs When Price of Underlying <= Strike Price of Long Call

Breakeven Point(s)

The underlier price at which break-even is achieved for the long call can be calculated using the following formula.

• Breakeven Point = Strike Price of Long Call + Premium Paid

Out-of-the-money Calls

Going long on out-of-the-money calls maybe cheaper but the call options have higher risk of expiring worthless.

In-the-money Calls

In-the-money calls are more expensive than out-of-the-money calls but less amount is paid for the option's time value. 

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