Course Description
Unlock the potential of directional trading with the Long Call strategy. In this course, we move beyond simple "bets" and look at how professional traders use In-the-Money (ITM) calls to gain market exposure with lower capital than buying the index outright. We will use a live US 500 example to break down the math, the probability, and the IG-specific execution.
The Professional Edge: Why we trade ITM
One of the most common mistakes beginners make is buying "cheap" options. They see an Out-of-the-Money (OTM) call priced at $50 and think it’s a bargain. Professionals, however, view these as "lottery tickets" because they have a very low probability of actually making money.
At ShareNavigator, we focus on In-the-Money (ITM) calls. While they are more expensive, they offer a "Professional Edge" that cheap options lack.
The Comparison: Hope vs. Probability
Feature | OTM "Lottery Ticket" | ITM "Professional Play" |
Cost | Cheap (e.g., $50) | Expensive (e.g., $1,100) |
Chance of winning | Lower (~10% - 15%) | Higher (>45%) |
Price Movement | Barely moves when the index rises. | Moves almost dollar-for-dollar with the index. |
Delta (Probability) | Low Delta (0.10) | High Delta (0.70) |
The "Why" | You are "hoping" for a miracle. | You are paying for probability. |
Why "Cheap" is Often Expensive
Beginners buy OTM calls because they have "unlimited upside" for a tiny cost. But if you buy 10 lottery tickets for $50 each and they all expire worthless, you’ve lost $500 with zero progress.
Professionals buy ITM calls because they have Delta. If you buy an option with an 0.70 Delta, it means for every $1 the US 500 rises, your option gains $0.70. It behaves like the actual index, but for a fraction of the cost of buying the full index.
💡 ShareNavigator Pro Tip: "Hope" is not a trading strategy. We don't want to buy a long shot; we want to buy an asset that is highly likely to retain its value and profit from even a small move in the right direction.
The Challenge of Directional Trading: 3 Ways to Lose
In our Short Put course, we discussed how selling options allows you to win in three different market directions. When you buy a Long Call, the math flips against you. This is why buying calls is considered an "aggressive" strategy: you are fighting against the clock.
In a Long Call, there are three directions the market can take, and you only win in one of them.
The 3 Directions of the Market
The Market Goes DOWN (YOU LOSE): This is obvious. Since you bought a "Bullish" bet, if the US 500 drops, your option loses value quickly.
The Market Goes SIDEWAYS (YOU LOSE): This is the "silent killer" for beginners. Because an option is a wasting asset, every day the market stays flat, your option loses value due to Time Decay (Theta). You can be "right" that the market didn't crash, but still lose money.
The Market Goes UP (YOU WIN): This is the only scenario where you profit. However, the market must go up enough to cover the "rent" (premium) you paid to enter the trade.
The "Velocity" Requirement
When you trade a Long Call, being "right" about the direction isn't enough. You must be right about:
Direction: The market must go up.
Magnitude: It must go up significantly.
Timing: It must do it before the clock runs out (Expiry).
💡 ShareNavigator Pro Tip: Because the odds are statistically against a Long Call, we use it sparingly—only when we expect a fast, powerful move. If we expect a slow, steady climb, we prefer the [Bull Call Spread], which we will introduce in Module 3 as a way to "cancel out" the cost of the sideways scenario.
Module 1: What is a Long Call?
Buying a Call option gives you the right (but not the obligation) to buy an asset at a set price (the Strike) before a certain date (the Expiry).1
The Market View: You are "Bullish." You expect the US 500 to rise significantly.
The Leverage: Instead of paying $6,950 for the full index, you pay a smaller Premium to control the same price movement.
Defined Risk: Your maximum possible loss is strictly limited to the premium you pay upfront.
Module 2: The US 500 Case Study (Deep ITM)
In this example, we are buying an In-the-Money (ITM) call.
The Setup:
Current US 500 Price: $6,950
Expiration: 35 Days
Strike Price: $6,800 (Deep In-the-Money)
Premium (Cost): 220.35 points
The Math at $5 per point:
Total Cost (Max Risk): 220.35 times $5 = 1,101.75
Intrinsic Value: 6,950 - 6,800 = 150 points
Extrinsic Value (Time Cost): 220.35 - 150 = 70.35 points
Breakeven Point at Expiry: 6,800 (Strike) + 220.35 (Premium) = 7,020.35
Understanding Option Value: The "Rent vs. House" Analogy
When you buy an ITM call option, the price you pay (the Premium) is actually made up of two very different parts. To understand them, think of the option like a House.
1. Intrinsic Value: The "Equity" in the House
Intrinsic value is the "real" value of the house—the part you would own outright if you settled the deal today.
In our US 500 example: The index is at $6,950 and your strike is $6,800.
Because you have the right to buy at $6,800 what is currently worth $6,950, you have $150 of "built-in" value.
This is your Equity. If the market stays flat, this value doesn't disappear; it belongs to you.
2. Extrinsic Value: The "Rent" (Time Value)
Extrinsic value is the extra money you pay for the time you are allowed to stay in the trade. Think of this as Rent.
In our US 500 example: The total premium is $220.35. Since $150 of that is your equity (Intrinsic), the remaining $70.35 is your rent.
You are paying this $70.35 to the market for the privilege of "living" in that bullish trade for 35 days.
The Professional Strategy: Lowering the Rent
Beginners lose money because they buy Out-of-the-Money (OTM) options. These options have zero equity—their entire price is just "Rent." If the market doesn't move, they lose 100% of their money.
Professionals buy In-the-Money (ITM) options because:
Durable Value: Most of the price is "Equity" ($150) which is protected if the market stays flat.
Lower Relative Rent: While the total cost is higher, the "Rent" ($70) is a smaller percentage of the total trade.
💡 ShareNavigator Pro Tip: Your goal as a Long Call trader is to find a house with high equity and low rent. This is why we look for Deltas of 0.70 or higher—it ensures you are buying a "Professional House" rather than a "Lottery Ticket."
Module 3: Strategy Pivot—Reducing Risk with a Spread
The biggest enemy of a Long Call is Time Decay (Theta). If the market stays flat, you lose those 70.35 points of time value.
💡 The Spread Upgrade: To offset this cost, you can turn this trade into a Bull Call Spread. By selling a higher strike call (e.g., at $7,100) against your $6,800 call, you receive a credit that lowers your total cost. If the market drops, your total loss is reduced because you collected that extra premium upfront.
Module 4: "What If?" Expiry Scenarios (Long Call)
What happens to your $1,101.75 investment after 35 days?
Scenario A: US 500 stays Flat (closes at $6,950)
Your option is worth 150 points. You lose the 70.35 points of time decay.
Total Result: Loss of $351.75. ($70.35 times $5).
Scenario B: US 500 drops to the Strike (closes at $6,800)
The option is worthless at expiry.
Total Result: Max Loss of $1,101.75.
Scenario C: US 500 rises to $7,100 (Bullish Move)
Your option is worth 300 points (7,100 - 6,800).
Your net profit is 300 - 220.35 = 79.65 points.
Total Result: Profit of $398.25. (79.65 times $5). This is a 36% return on your investment from a roughly 2% move in the underlying index.
Trade Management: When to Cut Your Losses
The biggest mistake traders make with Long Calls is "hoping for a recovery." Because your risk is capped at the premium you paid, it is tempting to just let it sit. However, professional trading is about preserving capital. If the market isn't moving in your favour, you should get out while your option still has value.
The "50% Stop-Loss" Rule
We recommend a strict exit rule for directional trades:
If the value of your Long Call drops by 50%, you close the trade immediately.
The Logic: If you paid $1,101.75 for your call and it is now worth only $550, the market is telling you that your bullish thesis was wrong or your timing was off.
By closing now, you "save" the remaining $550 to use for a better trade later. If you wait, time decay (Theta) will eventually turn that $550 into $0.
The "10-Day" Time Rule
Time is your most expensive cost. If you buy a 35-day option and the market has moved sideways for 10 days, you have already lost a significant chunk of your "Rent" (Extrinsic Value) with zero price gain.
The Action: If the US 500 hasn't made a move within 10-14 days, consider closing the position even if the 50% stop-loss hasn't been hit.
The Goal: Don't pay for time you aren't using. Live to fight another day with a fresh expiry.
How to Close for a Loss on IG
Find your open position in the 'Positions' tab.
Click the 'Close' button.
This will generate a RED (Sell) ticket. You are "Selling to Close" what you previously bought.
💡 ShareNavigator Pro Tip: It is much easier to recover from two 50% losses than from one 100% loss. Never let a single "directional bet" become a "total wipeout."
Module 5: Navigating Without Greeks (The Workaround)
IG Index does not display Delta on their tickets.
The External Compass: Use a free tool like Yahoo Finance to find the $6,800 Strike on the SPX (S&P 500).
Verify Delta: Look for a Delta of 0.70 or higher for this specific ITM strategy to ensure you have a high probability of profit.
Module 6: Platform Execution (IG Index)
Now that you have your "Compass" (the strike price and delta), it’s time to place the trade. On the IG platform, the visual cues on your deal ticket are your final safety check.
Step 1: Finding the Market
Navigate: Go to the left-hand sidebar and select Options.
Asset Class: Choose Indices and find the US 500.
Expiry: Click the arrow to see the expiries (e.g., Dec 2025) and select your chosen date. This opens the Option Chain.
Step 2: The "Side" and the "Ticket"
The option chain is split. For a Long Call, you stay on the left side (Calls).
Locate your Strike Price (e.g., $6,800).
Click the Buy price.
Step 3: The Blue Ticket Final Check
When the deal ticket pops up on the right, pause for three seconds.
The Color Check: The ticket must be BLUE. In the IG interface, Blue indicates you are "Buying to Open" (Long).
The Direction Check: Ensure the tab at the top says Buy.
⚠️ The Warning: Unlike our income strategies (Short Puts or Spreads) where we look for a Red (Sell) ticket, the Long Call is a "Debit" trade. If your ticket is Red, you are in the wrong trade. Selling a call without owning the index is a "Naked Call" and carries unlimited risk—the exact opposite of the "Defined Risk" strategy we are building here.
Step 4: Setting Your Stake
Size: Enter your $ per point (e.g., $5).
Margin: IG will show you the "Premium" required. Since this is a Long Call, you pay the full cost upfront.
Place Deal: Once you are happy the ticket is Blue and the strike is correct, click the green Place Deal button.
Here is the finalized Long Call Pre-Flight Checklist. Adding this as the final section provides a powerful "final barrier" to prevent beginner mistakes.
🚀 The Long Call: Pre-Flight Checklist
Before you click the buttons on your IG platform, run through these 5 professional checks. Directional trading requires precision.
The "Blue Ticket" Check: Is your IG deal ticket BLUE? For a Long Call, you are "Buying to Open." If the ticket is Red, you are accidentally taking on the unlimited risk of a Short Call.
The "Delta 70" Rule: Have you verified the Delta on an external site like Yahoo Finance? Ensure your strike has a Delta of 0.70 or higher. If it’s lower, you are buying a "lottery ticket," not a "professional house."
The "High Equity" Math: In your strike price, is the majority of the cost Intrinsic Value (Equity)? You want to be buying value, not just paying "Rent" (Time Value).
The "10-Day" Clock: Are you prepared to exit if the market goes sideways for 10–14 days? Time decay is your biggest expense—don't pay for time you aren't using.
The "50% Stop-Loss" Commitment: Have you committed to closing the trade if the option value drops by 50%? "Hope" is not a strategy; preserving your remaining capital for the next trade is.
Strategy Comparison: Risk vs. Probability
Choosing the right strategy depends on your market view and your risk tolerance. At ShareNavigator, we emphasize Probability of Profit (PoP) over "lottery ticket" home runs.
Strategy | Market View | Max Profit | Max Risk | Probability of Profit | Best For... |
Long Call | Aggressively Bullish | Unlimited | Premium Paid | ~30% - 40% | Fast-moving rallies. |
Aggressively Bearish | Significant | Premium Paid | ~30% - 40% | Hedging a crash. | |
Neutral to Bullish | Net Credit | High | 75% - 85% | Consistent income. | |
Neutral to Bullish | Net Credit | Capped | 70% - 85% | Consistent income. | |
Neutral to Bearish | Net Credit | Capped | 70% - 85% | Selling "resistance" | |
Moderately Bullish | Capped | Net Debit | ~50% - 60% | Cheap bullish entry. | |
Moderately Bearish | Capped | Net Debit | ~50% - 60% | Cheap bearish entry. |
Why Credit Spreads Have a Higher Win Rate
A common question students ask is: "Why not just short the stock or buy a long put if I'm bearish?"
The answer lies in the three directions of the market:
Shorting a Stock / Long Put: You only win if the market moves DOWN. If the market stays flat or goes up, you lose. (1 out of 3 scenarios).
Bear Call Spread: You win if the market moves DOWN, stays FLAT, or even RISES SLIGHTLY (as long as it stays below your ceiling). (3 out of 3 scenarios).
By "selling" time and volatility instead of just betting on direction, you turn the math of the market in your favor.
💡 The ShareNavigator Golden Rule
"We don't try to predict the next 500-point move. We try to identify the 300-point range where the market won't go. Trading is not about being 'right'; it's about not being 'wrong' enough to lose money."
🧪 Practice Before You Trade (Risk-Free)
We strongly recommend that all our students start by practicing these strategies in a simulated environment. This allows you to master the IG deal ticket, understand price fluctuations, and test your "Option Income Engine" without risking a single penny.
'Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.'
Switch to a live account only once you are comfortable with the platform and your strategy execution.
🚀 Free Strategy Call
Trading theory is only 10% of the journey. The remaining 90% is mastering strategy application, market psychology, and capital preservation under live conditions.
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