When to use Long Call strategy?

Writing put options is a way to generate income. However, the income from writing a put option is limited to the premium, while a put buyer can continue to maximize profit until the stock goes to zero.

Options Guy's Tips

Put contracts represent shares of the underlying stock, just like call option contracts. To find the price of the contract, multiply the underlying's share price by Put options can be in, at, or out of the money, just like call options:. Just as with a call option, you can buy a put option in any of those three phases, and buyers will pay a larger premium when the option is in the money because it already has intrinsic value.

Securities and Exchange Commission. Accessed July 2, Chicago Board Options Exchange.

Introduction to trading options

Trading Day Trading. Part of. Day Trading Instruments. Placing Orders. Trading Psychology. By Full Bio. Adam Milton is a former contributor to The Balance. He is a professional financial trader in a variety of European, U. Read The Balance's editorial policies. Examples presented are provided for illustrative and educational use only and are not a recommendation or solicitation to purchase, sell or hold any specific security or utilize any specific strategy.

Markets are volatile and prices can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. All investments involve risk, including potential loss of principal. Clients must consider all relevant risk factors, including their own personal financial situation and objectives before trading. Short Calls. Long Puts. Theta: A Long Call Ladder will benefit from Theta if it moves steadily and expires in the range of strikes sold. Gamma: This strategy will have a short Gamma position, which indicates any significant upside movement, will lead to unlimited loss.


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A Long Call Ladder is exposed to unlimited risk; it is advisable not to carry overnight positions. Also, one should always strictly adhere to Stop Loss in order to restrict losses. A Long Call Ladder spread is best to use when you are confident that an underlying security will not move significantly and will stays in a range of strike price sold. Another scenario wherein this strategy can give profit is when there is a decrease in implied volatility.

A covered call options trading strategy is an Income generating strategy which can be initiated by simultaneously purchasing a stock and selling a call option. It can also be used by someone who is holding a stock and wants to earn income from that investment. Generally, the call option which is sold will be out-the-money and it will not get exercised unless the stock price increases above the strike price. Choosing between strikes involves a trade-off between priorities.

Long Calls Options Trading | TD Ameritrade Singapore

An investor can select higher out-the-money strike price and preserve some more upside potential. However, more out-the-money would generate less premium income, which means that there would be a smaller downside protection in case ofstock decline. The expiration month reflects the time horizon of his market view. Let us consider the following scenario: Mr. X has purchased shares of ABC Ltd. Thus, the net outflow to Mr. X is Rs. The upside profit potential is limited to the premium received from the call option sold plus the difference between the stock purchase price and its strike price.

If the stock price stays at or below Rs. X can retain the premium of Rs. For the ease of understanding, concepts such as commission, dividend, margin, tax and other transaction charges have not been included in the above example. Any increase in volatility will have a neutral to negative impact as the option premium will increase, while a decrease in volatility will have a positive effect.

Time decay will have a positive effect. The covered call strategy is best used when an investor wishes to generate income in addition to any dividends from shares of stocks he or she owns. However, it may not be a very profitable strategy for an investor whose main interest is to gain substantial profit and who wants to protect downside risk. The Call Backspread is reverse of call ratio spread.

It is bullish strategy that involves selling options at lower strikes and buying higher number of options at higher strikes of the same underlying stock. It is unlimited profit and limited risk strategy. The Call Backspread is used when an option trader thinks that the underlying asset will experience significant upside movement in the near term. A believes that price will rise significantly above Rs on or before expiry, then he initiates Call Backspread by selling one lot of call strike price at Rs. Maximum profit from the above example would be unlimited if underlying assets break upper breakeven point.

However, maximum loss would be limited to Rs. Delta: If the net premium is received from the Call Backspread, then the Delta would be negative, which means even if the underlying assets falls below lower BEP, profit will be the net premium received.

Trading Long-Call Options to Reduce Risk

If the net premium is paid then the Delta would be positive which means any upside movement will result into profit. Vega: The Call Backspread has a positive Vega, which means an increase in implied volatility will have a positive impact.

Essential Options Trading Guide

Theta: With the passage of time, Theta will have a negative impact on the strategy because option premium will erode as the expiration dates draws nearer. Gamma: The Call Backspread has a long Gamma position, which means any major upside movement will benefit this strategy.


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The Call Backspread is best to use when an investor is extremely bullish because investor will make maximum profit only when stock price expires above higher bought strike. As the name suggests, the Stock Repair strategy is an alternative strategy to recover from loss that a stock has suffered due to fall in price. The Stock Repair strategy helps in recovering losses with just a moderate rise in the price of the underlying stock. Stock Repair strategy is initiated to recover from the losses and exit from loss making position at breakeven of the underlying stock.

A Stock Repair strategy should be implemented by investors who are looking forward to average their position by buying additional stocks in cash when the underlying stock price is falling. Instead of buying additional stock in cash one can apply stock repair strategy. Stock Repair strategy is implemented by buying one At-the-Money ATM call option and simultaneously selling two Out-the-Money OTM call options strikes, which should be closest to the initial buying price of the same underlying stock with the same expiry.

For example, an investor Mr. A thinks that price will rise from this level so rather than doubling the quantity at current price, here he can initiate the Stock Repair strategy. This can be initiated by buying one May 90 call for Rs. The net debit paid to enter this spread is Rs. Had Mr A doubled his position at 90 level then he would have lost Rs. This shows he is much better off by applying this strategy.

Placing an Options Trade

May 90 call bought would result in to profit of Rs.