Options Strategies Explained
Buy a call
What are the basics?
Like stocks, options are financial securities that can be bought and sold. There are two types of options: calls and puts.
Buy a call means you need to pay an amount (the premium) for a contract that gives you the right, not the obligation, to buy an asset (the underlying asset) at an agreed price (the strike price) on or before a specified date (the expiration date).
For example, you may purchase a $1,000 TUTU 202X-XX-XX call at $100 premium. In this case, you have the right to buy 100 shares of TUTU at $1,000 per share on or before 202X-XX-XX.
Why trade it?
Call options' prices are likely to rise if its underlying stock goes up
Generally, a call option and its underlying stock move in the same direction. So if you're bullish on the stock, you may consider buying its calls.
Speculation
Options can provide leverage. This means if the underlying stock moves upward, the rise in its call price could be bigger; similarly, if the underlying stock goes down, the fall in its call price could be greater, too. So calls can be used for speculation.
Limited loss but unlimited profit
The maximum potential loss for buying a call is the premium paid. But theoretically, the potential profit could be unlimited because there's no limit on how high the underlying stock price could go.