A long call is the most basic bullish options strategy. When you buy a call option, you are betting that the stock will go up. This guide explains exactly how long calls work and when to use them.
What is a Long Call?
A long call means you buy a call option. You pay a premium for the right to buy 100 shares of a stock at a specific price (the strike price) before the option expires. If the stock goes up, your call option increases in value.
Simple version: You pay a small amount upfront for the chance to profit if the stock goes up. If you are right, you can make many times your investment. If you are wrong, you only lose what you paid for the option.
How Long Calls Work
You pick a stock you think will go up
You buy a call option with a strike price and expiration date
You pay the premium (this is your maximum risk)
At expiration, one of two things happens:
Stock is above strike: Your option has value. You profit by the difference minus what you paid.
Stock is below strike: The option expires worthless. You lose the premium you paid.
Example
Stock ABC is trading at $50. You think it will go higher.
- Current price: $50
- You buy a $55 call expiring in 30 days for $2.00
- You pay $200 for the contract (100 shares x $2.00)
Outcome 1: Stock goes to $65. Your call is worth $10 ($65 - $55 strike). You make $1,000 minus the $200 you paid. Profit: $800. That is a 400% return.
Outcome 2: Stock stays at $50. Your call expires worthless. You lose the $200 you paid. That is your maximum loss.
Why Buy Long Calls?
- Leverage: Control 100 shares for a fraction of the cost of buying the stock
- Limited risk: You can only lose what you paid for the option
- Unlimited profit potential: The higher the stock goes, the more you make
- Capital efficiency: Use less money to take a bullish position
The Risks of Long Calls
The biggest risk is losing your entire investment. Options have expiration dates, so even if you are right about the direction, you can still lose if the move does not happen in time.
Time decay works against you. Every day that passes, your option loses a little bit of value (all else being equal). If the stock does not move, you slowly lose money.
Choosing the Right Strike Price
- In the money (ITM): Strike below current price. More expensive but higher probability of profit.
- At the money (ATM): Strike near current price. Balanced risk and reward.
- Out of the money (OTM): Strike above current price. Cheaper but needs a bigger move to profit.
Tip: Beginners often buy far out of the money calls because they are cheap. This is usually a mistake. These calls have a low probability of profit. Start with at the money or slightly out of the money calls.
Choosing the Right Expiration
- Short term (1-2 weeks): Cheaper but time decay is fastest. High risk.
- Medium term (30-60 days): Good balance of cost and time for the trade to work.
- Long term (90+ days): More expensive but gives you more time. Lower risk of timing issues.
Long Call vs Buying Stock
Here is how they compare:
- Cost: Long calls cost much less than buying shares
- Risk: Long calls have limited risk. Stock can fall to zero.
- Time: Stock has no expiration. Options do.
- Dividends: Stock gets dividends. Options do not.
- Leverage: Options offer more leverage. This can be good or bad.
Tips for Buying Calls
- Have a thesis: Know why you expect the stock to move up
- Set a target: Decide in advance when you will take profits
- Cut losses early: If the trade goes against you, do not wait until expiration
- Manage position size: Never put too much into a single options trade
- Check implied volatility: High IV means expensive options. You need a bigger move to profit.
Track Your Options Trades
Pro Trader Dashboard automatically tracks all your long call trades. See your win rate, average return, and portfolio performance over time.
Summary
A long call is when you buy a call option, betting the stock will go up. You pay a premium for the right to buy shares at the strike price. If the stock rises above your strike, you profit. If it does not, you lose what you paid. Long calls offer leverage and limited risk, making them popular with traders who want bullish exposure without buying shares.
Want to learn more options strategies? Check out long puts for bearish trades or debit spreads to reduce your cost basis.