How To Buy Calls «480p»

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".

Check out these guides to see these concepts in action and avoid common beginner traps: how to buy calls

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

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. Check out these guides to see these concepts

Theoretically unlimited if the stock price skyrockets. The "Aha!" Moment: Leverage in Action

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