Long Call


A long call strategy typically doesn't appreciate in a 1-to-1 ratio with the stock, but pricing models often give us a reasonable estimate about how a $1 stock price change might affect the call's value, assuming other factors remain the same. What's more, the percentage gains relative to the premium can be significant if the forecast is on target.

The call buyer who plans to resell the option at a profit is looking for suitable opportunities to close the position out early: usually a rally and/or a sharp increase in volatility. Some investors set price targets or re-evaluation dates; others 'play it by ear.' Either way, timing is everything for this strategy, because all value must be realized before the option expires. Being right about an anticipated rally does no good if it occurs after expiration.