How To Buy Calls Access

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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?

Imagine you’re watching a company like Netflix, which is trading at . You’re convinced their upcoming earnings report is going to be a blockbuster. Instead of buying 100 shares for a steep $39,000 , you decide to "buy a call". The Setup: Buying the "Right" how to buy calls

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"—once that expiration date hits, your $600 is gone forever.

Your contract is now worth $2,000 ($20 x 100 shares). Check out these guides to see these concepts

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.

The earnings report drops, and it’s a massive success. Netflix stock surges to . Because you own the "right" to buy those shares at $400 , your contract is now "in-the-money". You’re convinced their upcoming earnings report is going

Each share in your contract is now worth $20 more than your strike price ($420 - $400).