Buy a call. Profit if the underlying rises above your strike + premium. Max loss is the premium paid.
Long call = buy one call. The simplest options trade. Profit if the underlying rises above (strike + premium paid). Max loss is the full premium paid — no further downside.
Best for strong bullish conviction with a clear catalyst before expiry. Works less well in low-conviction or low-IV environments — the Theta cost eats you alive if the underlying drifts sideways.
Today: NIFTY at 22,000. You're bullish for a 1.5% move by Thursday's weekly expiry.
Buy NIFTY 22,100 CE at ₹40 premium. Cost = ₹40 × 25 (lot) = ₹1,000 per lot. Max loss = ₹1,000.
Breakeven at expiry: 22,100 + 40 = 22,140. NIFTY needs to close above 22,140 for profit. If NIFTY closes at 22,300, intrinsic = 200, payoff = 200 × 25 - ₹1,000 entry cost = ₹4,000 per lot (300% on capital).
Strong directional conviction with a near-term catalyst. Earnings, RBI policy, sector news.
Low or mid IV regime. You don't want to pay peak premium — IV crushes after the catalyst.
Clear stop loss. Premium paid IS your max loss. Size accordingly.
Sideways markets. Theta bleeds you out even if NIFTY is roughly flat.
Buying OTM 'lottery tickets' hoping for 10x payoffs. The math says you lose more often than you win, and the wins rarely cover the losses.
High-IV regimes where you pay peak premium. IV crush turns a small directional move into a losing trade.
ATM has Delta ~0.50, higher absolute cost, faster Theta. OTM has Delta 0.10-0.30, lower cost, slower Theta but lower probability. For high-conviction near-term moves: ATM. For wider time horizons or smaller capital: slightly OTM.
Weekly if catalyst is within 5 days — cheap, high gamma payoff if right. Monthly if the move could take weeks — slower Theta bleed gives you time.
Common rule: book at 50-100% of premium when intrinsic + remaining time value gets there. Holding to expiry for max profit often gives back gains as Theta accelerates.
Most retail rule: <2-3% of account per options trade. For ₹1 lakh account = ₹2,000-3,000 max per long call position.