How Buy Call Option? | What is a Call option and How we trade?

Buy Call

how buy call option

      Buy Call (29 Hedging Strategies By Vinay Bhandari)

        How Buy Call option

        How to buy call option, Buying or “Going Long” on a Call is a strategy that must be devised when the investor is bullish on the market direction moving up in the short term.

        A Long Call Option is the simplest way to benefit if the investor believes that the market will make an upward move. It is the most common choice among first-time investors. “Being Long” on a Call Option means the investor will benefit if the underlying Stock/Index rallies. However, the risk is limited on the downside if the underlying Stock/Index corrects.

        Investor View: Bullish on the Stock / Index.

        Risk: Limited to the premium paid.

        Reward: Unlimited.

        Breakeven: Strike Price + premium paid.

       Illustration

        E.g. Nifty is currently trading @ 15500. The investor is expecting the markets to rise from these levels. So buying

        Call Option of Nifty having Strike 15500 @ premium 50 will benefit the investor when Nifty goes above 15550.

Strategy

Stock /Index

Type

Strike

Premium

Buy Call

NIFTY (Lot size 75)

Buy Call

15500

50

 

        The Payoff Schedule for the above is below.

       Payoff Schedule         

Nifty @ Expiry

Payoff

15200

-3750

15300

-3750

15400

-3750

15500

-3750

15550

0

15600

3750

15700

11250

15800

18750

15900

26250

 

Payoff charts

No
Strike
Premium
Option
Buy(1)Sell(0)
Expiry
Gross P/L
LOT SIZE
TOTAL P /L
1 15500 50 call 1 16000 450 75 33750
2 15950 400 75 30000
3 15900 350 75 26250
4 15850 300 75 22500
5 15800 250 75 18750
6 15750 200 75 15000
7 15700 150 75 11250
8 15650 100 75 7500
9 15600 50 75 3750
pls WhatsApp 9699646408 15550 0 75 0
Difference 50 15500 -50 75 -3750
Expiry from 16000 15450 -50 75 -3750
lot size 75 15400 -50 75 -3750
15350 -50 75 -3750
15300 -50 75 -3750
15250 -50 75 -3750
15200 -50 75 -3750
15150 -50 75 -3750
15100 -50 75 -3750
15050 -50 75 -3750
15000 -50 75 -3750
14950 -50 75 -3750
14900 -50 75 -3750
14850 -50 75 -3750
14800 -50 75 -3750
14750 -50 75 -3750
14700 -50 75 -3750
14650 -50 75 -3750
14600 -50 75 -3750
14550 -50 75 -3750
14500 -50 75 -3750
14450 -50 75 -3750
14400 -50 75 -3750
14350 -50 75 -3750
14300 -50 75 -3750
14250 -50 75 -3750
14200 -50 75 -3750
14150 -50 75 -3750
14100 -50 75 -3750
14050 -50 75 -3750
14000 -50 75 -3750
13950 -50 75 -3750
13900 -50 75 -3750
13850 -50 75 -3750
13800 -50 75 -3750
13750 -50 75 -3750
13700 -50 75 -3750
13650 -50 75 -3750
13600 -50 75 -3750
13550 -50 75 -3750


In the above chart, the breakeven happens the moment Nifty crosses 15550, and risk is limited to a maximum of 3750 (calculated as Lot size * Premium Paid).

What Is Sell Straddle? Click Here>>>

 

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