To Buy Calls: How

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".

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? 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

Each share in your contract is now worth $20 more than your strike price ($420 - $400). In this scenario, while a regular shareholder saw

After subtracting your initial $600 investment, you’ve made a $1,400 profit .

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"

Your contract is now worth $2,000 ($20 x 100 shares).