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Long Call



	Purchasing calls has remained the most popular strategy
	with investors since listed options were first introduced.
	Before moving into more complex bullish and bearish 
	strategies, an investor should thoroughly understand 
	the fundamentals about buying and holding call options.

Market Opinion?
	Bullish to Very Bullish

When to Use?
	This strategy appeals to an investor who is generally 
	more interested in the dollar amount of his initial
	investment and the leveraged financial reward that 
	long calls can offer. The primary motivation of this 
	investor is to realize financial reward from an 
	increase in price of the underlying security. 
	Experience and precision are key to selecting the right
	option (expiration and/or strike price) for the most
	profitable result. In general, the more out-of-the-money
	the call is the more bullish the strategy, as bigger 
	increases in the underlying stock price are required 
	for the option to reach the break-even point.



As Stock Substitute
	An investor who buys a call instead of purchasing the 
	underlying stock considers the lower dollar cost of 
	purchasing a call contract versus an equivalent amount 
	of stock as a form of insurance. The uncommitted capital
	is "insured" against a decline in the price of the call 
	option's underlying stock, and can be invested elsewhere.
	This investor is generally more interested in the number
	of shares of stock underlying the call contracts purchased,
	than in the specific amount of the initial investment - 
	one call option contract for each 100 shares he wants to 
	own. While holding the call option, the investor retains 
	the right to purchase an equivalent number of underlying 
	shares at any time at the predetermined strike price until
	the contract expires.

Note: 
	Equity option holders do not enjoy the rights due 
	stockholders e.g., voting rights, regular cash or special 
	dividends, etc. 
	A call holder must exercise the option and take ownership of
	the underlying shares to be eligible for these rights.

Benefit
	A long call option offers a leveraged alternative to a position
	in the stock. As the contract becomes more profitable, increasing
	leverage can result in large percentage profits because 
	purchasing calls generally requires lower up-front capital 
	commitment than with an outright purchase of the underlying stock.
	Long call contracts offer the investor a pre-determined risk.

Risk vs. Reward 
	Maximum Profit: Unlimited

Maximum Loss: Limited
	Net Premium Paid

Upside Profit at Expiration: 
	Stock Price - Strike Price - Premium Paid 
	Assuming Stock Price above BEP

	Your maximum profit depends only on the potential price increase 
	of the underlying security; in theory it is unlimited. At 
	expiration an in-the-money call will generally be worth its 
	intrinsic value. Though the potential loss is predetermined and 
	limited in dollar amount, it can be as much as 100% of the premium
	initially paid for the call. Whatever your motivation for purchasing
	the call, weigh the potential reward against the potential loss of 
	the entire premium paid.

Break-Even-Point (BEP)?
	BEP: Strike Price + Premium Paid

	Before expiration, however, if the contract's market price has 
	sufficient time value remaining, the BEP can occur at a lower 
	stock price.

Volatility
	If Volatility Increases: Positive Effect
	If Volatility Decreases: Negative Effect
	
	Any effect of volatility on the option's total premium is on the time 
	value portion.

Time Decay?
	Passage of Time: Negative Effect 

	The time value portion of an option's premium, which the option holder
	has "purchased" by paying for the option, generally decreases, or decays,
	with the passage of time. This decrease accelerates as the option 
	contract approaches expiration.
	
Alternatives before expiration?
	At any given time before expiration, a call option holder can sell the
	call in the listed options marketplace to close out the position. This
	can be done to either realize a profitable gain in the option's premium,
	or to cut a loss.

Alternatives at expiration?
	At expiration, most investors holding an in-the-money call option will 
	elect to sell the option in the marketplace if it has value, before the
	end of trading on the option's last trading day. An alternative is to 
	exercise the call, resulting in the purchase of an equivalent number of
	 underlying shares at the strike price. 
	        
	      



 
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