🚀 The Long Call Masterclass: Bullish Trading with Maximum Leverage
Welcome to the first episode of our 6-part Masterclass, where we break down one of the most exciting and foundational options strategies: the Long Call! If you’re bullish on a stock, this strategy provides exposure and leveraged returns while strictly limiting your downside risk.
🎯 Understanding the Call Option Foundation: AAPL example
At its core, a call option is a simple contract:
It gives you the Right, but not the Obligation, to buy 100 shares of an Underlying Asset (like AAPL).
The purchase is executed at a fixed price (Strike Price) on or before a specified Expiration Date.
You pay a small, non-refundable cost for this right called the Premium (your maximum loss).
Key Terminology Defined
Underlying Asset: The stock you are betting on (e.g., AAPL).
Strike Price: The fixed price you can buy the shares at (e.g., $240.00).
Expiration Date: The date your "right to buy" ends (e.g., Jan 2026).
Premium: The cost per share for the contract (e.g. $22.15).
Total Cost / Max Risk: Premium times 100 (e.g. $2,215). This is your absolute max loss.
Long Call: Creating a Long Call Trade
The long call strategy is constructed by buying a call option. An investor with this position can be said to be ‘Long’ a call.
Long Call Strategy = Buy a Call Option
Long Call: Debit vs. Credit
A long call strategy will always be established at a net debit. In other words, it costs you money to buy a Long Call.
Long Call Strategy = Debit
Long Call: Versus Buying the Stock
Comparison to Buying Stock:
Buying 100 Shares outright costs $25,240 and risks the full amount.
Buying 1 Long Call costs $2,215 and limits risk to that amount.
Long Call: Share price expectation
The long call strategy is a very bullish position. We want the share price of AAPL to rise substantially between now and the expiration date (Jan 2026 in our example).
Long Call Strategy = Very bullish
Profit & Loss Mechanics
Maximum Profit: Unlimited. The higher the stock price moves above the breakeven, the greater the profit.
Maximum Loss: Limited to the Debit Paid ($2,215 in our example).
Breakeven Price (at Expiration): Strike Price + Net Debit Paid
$240.00 + $22.15 = $262.15
Key Takeaway: The breakeven for the call is higher than for simply buying the stock, which is a key drawback.
⚡ Leverage: The Power of Return on Investment (ROI)
The true power of the Long Call is its leverage.
Scenario: AAPL hits $300
Buying 100 Shares yields approx 18.86 ROI.
Buying 1 Long Call yields a massive 170.88% ROI.
By risking a fraction of the capital, the Long Call generates an exponentially higher percentage return.
📉 The Relentless Enemies: Time and Probability
The Long Call faces significant headwinds: Time Decay (Theta) and a lower Probability of Profit.
⏳ Theta: The Time Decay Trap
Theta is negative for a Long Call, meaning the option loses value every day due to time passing.
Example: A Theta of -0.086 means you lose $8.60 per day.
The Trap: Time decay accelerates dramatically in the final 30-45 days before expiration, making it a liability that your stock price gain must quickly overcome.
🎲 Probability of Profit (POP)
Due to the higher breakeven price ($262.15 vs. $252.40 for the stock), the POP for the Long Call is generally lower than 50% (Our example POP is 41%).
The further Out-of-the-Money (OTM) you buy, the lower your POP becomes.
🧪 Mastering the Greeks: Delta, Gamma & Vega
To manage the trade, you must understand the "Greeks."
Delta : Your Directional Compass
Measures: How much the option premium changes for every $1 move in the stock. It is always positive ($0 to $1.00).
Example: A Delta of 0.696 means the option gains $0.696 when AAPL rises by $1.
ITM Proxy: Delta is a rough proxy for the probability of the option expiring In-The-Money (ITM) at expiry. We generally prefer a Delta of 0.7 or higher for long calls.
Gamma: The Accelerator
Measures: The rate of change of Delta. Gamma is always positive.
Function: It's the "gas pedal"—a positive Gamma means your Delta increases as the stock moves in your favor, causing your option value to accelerate faster toward profitability.
Vega: The Volatility Factor
Measures: Price sensitivity to Implied Volatility (IV).
The Risk (Volatility Crush): If you buy when IV is high and it drops sharply afterward, your option premium will lose value due to Vega. Strategy: Aim to buy when IV is low.
🧭 Trade Management Guidelines
Strike Price Selection
Your level of bullishness dictates the strike price choice:
In-The-Money (ITM): Most expensive, but best chance of profit (lowest breakeven). Preferred for our strategy.
At-The-Money (ATM): Moderate cost and POP.
Out-of-The-Money (OTM): Least expensive, but lowest chance of profit (highest breakeven).
Share Navigator's Preferences
We prefer to manage the drawbacks by following these rules:
Only buy calls with an Expiration of at least 3 months.
Target In-The-Money (ITM) strikes with a Delta of 0.7 or higher.
Take profit when the option's value increases by 50%.
Long Call: Assignment Risk
You have no assignment risk with a long call strategy.
Long Call: Actions to take at expiry
If the share price is above the strike price at expiry, you can do two things:
Close (SELL) the call option for a profit or partial loss. 99% of the time, option traders sell the options and do not exercise their rights held within the option.
Exercise your right to buy the shares.This happens less than1% of the time.
In either of the above, the profit or loss will be similar.
If the share price is below the strike price at expiry you will lose your investment and the call options will expire worthless. There is nothing for you to do.
Long Call: Ex-Dividend
Should a stock go ex-dividend before expiry you may want to consider taking early assignment to receive the dividend for the stock. This will depend on the dividend amount.
📖 Long Call Masterclass Summary
This 6-episode Masterclass provided a deep dive into the Long Call option strategy, establishing it as the foundational strategy for traders with a very bullish market outlook.
Core Concepts Mastered
Definition & Right: The Long Call gives the buyer the right, but not the obligation, to buy 100 shares of the underlying asset at a fixed Strike Price until the Expiration Date.
Risk vs. Reward: The strategy is celebrated for its defined, limited maximum loss (equal to the Premium paid) and its theoretically unlimited maximum profit, enabling superior Return on Investment (ROI) through leverage compared to buying the stock outright.
Breakeven Price: The point of profitability at expiration is the Strike Price + Premium Paid, which is a key drawback as it requires a greater stock price movement than simply owning the stock.
Key Strategic Takeaways
Directional Outlook: The Long Call is a very bullish position.
Capital Requirement: It is established at a net debit (it costs money to enter the trade).
The Greeks (Risk Management):
Delta: Measures price sensitivity; we target a Delta of 0.7 or higher to increase the Probability of Profit (POP).
Theta: The relentless enemy. As the option is a wasting asset, Theta is negative, causing value to decay daily, accelerating sharply in the final 30–45 days.
Gamma: The "accelerator" that increases Delta as the stock moves in your favour.
Trade Management: We learned that to mitigate Theta risk and improve the POP, it is best to:
Buy options with at least 3 months to expiration.
Target In-The-Money (ITM) strikes (0.7).
Take profits at a 50\% return.
🎯 Next Steps
Ready to apply these strategies in the real market?
Stop guessing and start trading with confidence. Book a one-to-one mentoring session today to walk through your first Long Call setup with a professional options coach and get personalized strike price and expiration guidance!
Your Options Journey Continues...
Congratulations on completing the Long Call Masterclass! Your next step in mastering the fundamentals is to understand the bearish side of trading.
👉 Enroll now in the Long Put Masterclass! Learn how to profit when you believe a stock's price will fall, once again using limited risk and powerful leverage.
Long Call: Knowledge Check
Time for you to apply your knowledge.
Pick any stock or index that you are bullish on.
Login to your personal simulated trading account. Please contact us if you don’t have a personal simulated trading account.
Buy 1 contract of an ITM, ATM and OTM Call (3 separate trades) with an expiry greater than 1 year.
Monitor the trades and write down as many questions that spring to mind. For example, why was one option more expensive than the other? Why is one option making more profit than the other?
Contact us with your questions.
How to Trade Long Calls on a Trading Platform
Buying Call using TWS
Buying a call using IBKR mobile APP
How to manage a long Call Trade
How to close a Long Call on TWS
How to Roll Out a Long Call on TWS
Test Your Knowledge
At this stage it is important for you to get some practical experience in buy call options. so here is what you need to do:
Pick any optionable stock
Pick a target price for the stock to the upside out for 1 year (Don't get too bogged down in this)
Go to your Demo trading account
Look up the Call Option Quotes out at least 1 year with a Delta of 0.7
Pick a Call Option of your choice
Create a Profit and Loss table for the Call Option
Identify your Breakeven price
Identify your Maximum loss
Identify your profit potential (at your target price)
Calculate your potential ROI
Now do a profit and loss table if you bought the shares
Compare Buying the stock to Buying the Calls
Which strategy offers the greatest risk?
Which strategy offers the greatest ROI?
Which strategy would you prefer and why?
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