How To Buy Calls π― Free Forever
Your contract is now worth $2,000 ($20 x 100 shares).
In this scenario, while a regular shareholder saw a ($390 to $420), your call option delivered a 233% return on your $600. The Reality Check: What if it Fails? how to buy calls
Theoretically unlimited if the stock price skyrockets. The "Aha!" Moment: Leverage in Action Your contract is now worth $2,000 ($20 x 100 shares)
Each share in your contract is now worth $20 more than your strike price ($420 - $400). Theoretically unlimited if the stock price skyrockets
If the earnings report had been a dud and the stock stayed at or dropped, your option would have expired worthless . Unlike a stock owner who can wait for a recovery, an option buyer has a "ticking clock"βonce that expiration date hits, your $600 is gone forever.
You buy with a strike price of $400 that expires in one month. This contract costs you a "premium" of $6.00 per share, or $600 total (since one contract covers 100 shares). Your Risk: The most you can lose is that $600 premium.
Check out these guides to see these concepts in action and avoid common beginner traps: