Options Education

OIC201C: Buying Calls

Course Objective:

To describe what a long call is, what some of the benefits are, and what the position looks like graphically. The course will explain how long calls can be components of more complex trades, the benefits and disadvantages of long call positions.

Who Should Take This Course:

Fundamental and Intermediate Students

Course Description:

"Buying Calls" introduces buying calls as a directional, decidedly bullish strategy. This course covers profit potential, maximum risk, primary benefits, and how the choice of a long call's strike price and expiration month can allow an investor to tailor both risk of loss and profit potential. At the conclusion of this course, the learner should understand what a long call position is and the risks and rewards of this strategy.

Course Chapters

Chapter 1 - Introduction

Introduces what a long call is, what some of the benefits are, and what the position looks like graphically. This chapter also explains how long calls can be components of more complex trades.

Chapter 2 - Strategy Overview

In this chapter the benefits of a long call position are explained along with profit potential, loss potential, break-even point, the effect of volatility change and the passage of time.

Chapter 3 - Strategy Specifics

This chapter takes a hypothetical call purchase and then comprehensively expands on each of the sub-topics of Chapter 2. This chapter finishes by explaining the effects of a dividend on a long call position and how the early exercise of the call would enable the call holder to participate in the dividend.

Chapter 4 - Choices

This chapter explains how the choice of month and strike correlate to risk and reward. It also discusses how motivations lead us to risk vs. reward assumptions, which then lead us to corresponding months and strikes.

Chapter 5 - Alternatives

The alternatives of a long call position prior to expiration are explained.

Chapter 6 - Conclusion

This chapter ties together all the previously discussed concepts.

Chapter 7 - Review

Review of what you have learned.

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