Class: Buying Calls
OIC Education Program

Introduction (1 of 1)

Purchasing call options is certainly the simplest and most popular way investors employ equity option contracts, and has been since exchange-listed equity options were first introduced to the world in 1973. Though relatively straightforward with respect to their use, call options are one of the building blocks of many more sophisticated option strategies and so should be thoroughly understood by all option investors.

The long equity call is a purely directional strategy. That is to say, once purchased an investor has a decidedly bullish position on the underlying stock. Financial rewards are reaped when the investor is successful in picking stocks that increase in value. Many more complex option strategies can reduce the exactitude of picking the right stocks. Success with the long call strategy can best be achieved after diligent research, and with commitment to an opinion that the underlying stock will increase in value.

Understanding Profit and Loss Graphs

For an explanation of the graph, view the
Understanding Profit and Loss Graphs
(PDF | 497k).