Long Call
Buying a call gives you the right to buy the underlying stock at the strike price any time until expiry.
Long Call (Buy a Call)
You would buy a call if you think the price of the underlying stock is going to rise (when you are bullish on the underlying stock).
Figure 4 shows the risk return involved with buying a call with a strike price of $25 for a premium of $5. When you buy a call the most you can lose is the premium you paid for the call. However there is unlimited profit if the underlying stock moves up.
Figure 4.
If the price of the stock rose to $40 by the expiry date the call option would be worth $15 ($40 the stock price - $25 the strike price). In this example the holder of the call option would have a profit of $10 ($15 the value of the option at expiry - $5 the premium paid for the option).
