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.
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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).
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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.
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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.
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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.
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