What Is A Long Call?

Long Call

What is a long call?

A long call is a term used when you own a call option for an underlying asset. A call option is a contract where the buyer has the right (not the obligation) to exercise a buy transaction at a specific strike price at or before an expiration date.

In the world of trading, owing a long call means that you have a contract that gives you the right to buy the underlying asset at a specific price, before a maturity date. Once the contract is exercised, the contract disappears and the underlying asset will be part of your open positions at the specified strike price. If you had a short position on the asset beforehand, exercising this contract will be expressed as if you have covered your short position. The alternative of exercising would be to sell your option contract to another trader on the market.

What are its components? Can you show me how to have a long call in my open positions?

The components of a long call are quite simple. You simply need to perform an order to buy to open an option contract based on your desired specifications:LongCall1

When and why should I have a long call?

            You should have a long call option if you expect the stock price to go up, but would like to have a cushion of protection. As an example, if you own solely the underlying asset and the price goes down, the lost will have a stronger impact on the underlying asset than on the option contract.

What does it look like graphically? What is the payoff and profit graph? LongCall2

What is the break-even point?LongCall3