Long Call
A long call option is a bullish strategy where an investor buys a call option with the hope that the underlying asset's price will increase.
Here's an example of a buying a call option on Avax (AVAX).
Example
Let's say it's January 1st, 2023, and Avax is trading at $50 per token. An investor believes that the price of AvaX will increase in the next few months and decides to buy a call option with a strike price of $60, expiring on June 1st, 2023.
The investor pays a premium of $5 per option contract to purchase this call option. If on June 1st, 2023, the price of Avax is $70, the investor can exercise the option and buy Avax at the strike price of $60, then sell it in the market for $70, making a profit of $10 per token ($70 - $60).
However, if the price of Avax is below $60 on June 1st, 2023, the option will expire worthless, and the investor will lose the $5 premium paid for the option.
The breakeven point is the price at which the investor will neither make a profit nor incur a loss.
In summary, the long call option strategy allows an investor to benefit from a potential price increase of the underlying asset while limiting the risk to the premium paid for the option.
Last modified 1mo ago