The world of stock option trading is founded on two basic building blocks: Most traders who buy call options do so with the intent of selling them later at a higher price.

The concept of buying low and selling high is a shared objective among stock and option traders alike.

A call option gives the buyer of the contract the right, but not the obligation, to buy shares of stock at a specific price on or before an expiration date. This right to buy the stock at a set price becomes more valuable as the stock price rises further and further.

Top 4 options strategies for beginners | Futures Magazine

For example, if Apple Inc. This is why buying a call option is considered a bullish trade. Think of it as an alternative to buying stock.

And what makes it particularly attractive as mentioned in What are Stock Options? Perhaps the best way to wrap your ahead around the embedded advantages to buying call options is to see a side by side comparison versus buying stock. On the positive side the potential profit is unlimited. Plus, I still have unlimited profit potential over the next six months should Disney stock rocket higher.

Stock option strategies beginners Disney moves favorably, the call option will generate a much higher percentage return than a simple long stock position would.

Call Options Strategies - Options Trading for Beginners | InvestorPlace

Be aware, however, that leverage slices both ways. Yes, the profits rack up fast, but stock option strategies beginners too can the losses.

Call options are particularly attractive on expensive stocks that have black scholes put formula excel priced out the little guy. PCLNwhich trades for four digits, call options and option trades in general may be just the admission ticket you need.

The uses of long call options are myriad. In addition to the using calls in lieu of buying stock, you could also use them to solve the fortunate dilemma of when to take profits on a winning stock position. Do yourself a favor and continue exploring how to effectively use call options to reduce risk while enhancing your investment returns.

Article printed from InvestorPlace Media, http: Financial Market Data powered by FinancialContent Services, Inc. Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes. Trading Advice Trade of the Day Trading Report How to Trade Options. Breaking news sponsored by googletag.

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