What are long calls and long puts?

Long Calls

A long call is an options strategy where an investor purchases a call option. This contract gives the holder the right, but not the obligation, to buy an underlying stock at a specified strike price on or before the option’s expiration date. Sources such as Webull US describe this as one of the foundational options strategies used to gain exposure to potential price movements in a stock.

Why do investors use long calls?

Some investors use long calls to participate in potential upward price movements of a stock without purchasing the shares outright. The option’s value may change as the price of the underlying security moves.

To purchase a call option, the buyer pays a premium. This is the upfront cost of the contract. Standard equity option contracts typically represent 100 shares of the underlying stock.

If the stock price moves above the strike price before expiration, the option may increase in value. In certain situations, the holder may choose to exercise the option to buy shares at the strike price.

If the option expires and the market conditions are not favorable, the contract may expire worthless and the premium paid may be lost.

Important:

Options trading involves risk and is not suitable for all investors. This information is provided for educational purposes only and does not constitute investment advice or a recommendation

• Maximum gain = (Theoretical Infinite Price – Call Option Strike Price - Premium) x 100 shares. $∞ = ($∞- $10 - $2) x 100 shares.
• ‌Maximum loss = Premium Paid x 100 shares. $200 = $2 x 100 shares.
• Break-even = Strike Price + Premium Paid. $12 = $10 + $2.

Long Puts

A long put is an options strategy where an investor purchases a put option. This contract gives the holder the right, but not the obligation, to sell an underlying stock at a specified strike price on or before the expiration date. Educational materials from Webull US describe long puts as one of the core options strategies used to understand how options function.

Some investors use long puts to gain exposure to potential downward price movements in a stock or to help offset risk in an existing position. The option’s value may change as the price of the underlying security moves.

To purchase a put option, the buyer pays a premium, which is the upfront cost of the contract. Standard equity option contracts typically represent 100 shares of the underlying stock.

If the stock price moves below the strike price before expiration, the option may increase in value. In certain situations, the holder may choose to exercise the option and sell shares at the strike price.

If the market price remains above the strike price and the option expires, the contract may expire without value and the premium paid may be lost.

Important:

Options trading involves risk and may not be suitable for all investors. This information is provided for educational purposes only and should not be considered investment advice or a recommendation.

• Maximum gain = (Put Option Strike Price - Premium) x 100 shares. $800 = ($10- $2) x 100 shares.
• Maximum loss = Premium Paid x 100 shares . $200 = $2 x 100 shares.
• Break-even = Strike Price - Premium Paid. $8 = $10 - $2.