InvestorQ : How to play a bullish market with call options?
Jignesh Gupta made post

How to play a bullish market with call options?

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Maniish Lofar answered.
2 years ago

Buying plain vanilla call options is the simplest of options strategies where you just buy a plain vanilla call option. Assume that the stock price of RIL is currently quoting at Rs.1120. You can buy an Rs.1140 call option in the current series by paying a premium of Rs.25. This is the maximum loss that you will incur irrespective of how low the stock price goes. Your profits on RIL will start after you have covered the cost of the option premium. Assume that that price of RIL has now moved up to Rs.1165. That means you must be making a profit of Rs.25 after covering your cost of the option if the price of RIL moves up to Rs.1190. But in reality the actual value of the option will be higher as it will also factor in the time value of money. Assume that the RIL 1140 call option is trading at Rs.60, and then you can reverse your position by selling the call option and booking a profit of Rs.35 (65-25) on your call option position. This is one of the simplest methods of playing the bullish sentiments with call options.