Long Call Options Trading Strategy | Summary and Q&A

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June 7, 2020
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The Organic Chemistry Tutor
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Long Call Options Trading Strategy

TL;DR

This video explains the long call options trading strategy, which involves speculating that a stock's value will increase, resulting in potential unlimited rewards and limited risk.

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Questions & Answers

Q: What is the intrinsic value of a call option and how does it relate to the stock price?

The intrinsic value of a call option is the difference between the stock price and the strike price. As the stock price increases, the intrinsic value of the call option also increases.

Q: How does implied volatility affect the value of a call option?

When implied volatility increases, the extrinsic value of the call option increases. Conversely, when implied volatility decreases, the extrinsic value of the call option decreases.

Q: What is time decay and how does it impact the value of a call option?

Time decay refers to the decrease in value of a call option as its expiration date approaches. As time decreases, the extrinsic value of the call option also decreases.

Q: What are the advantages and risks of the long call options trading strategy?

The advantage of the long call options strategy is limited risk and potentially unlimited rewards. However, the strategy only proves profitable if the stock's value increases significantly before expiration.

Summary & Key Takeaways

  • The long call options trading strategy involves buying call options when the investor believes that the stock's value will rise.

  • Factors such as implied volatility, time decay, intrinsic value, and extrinsic value affect the price of call options.

  • The risk in this strategy is limited to the cost of the call option, while the potential gain is unlimited.

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