To buy a call option, you select an underlying asset, expiration date and strike price, then submit a buy to open order and pay the option premium. The position gives you the right—but not the obligation—to buy the underlying at the strike price during the contract’s life.
If that terminology is new, begin with what a call option is and how it works. The steps below focus on the decisions required to turn a bullish idea into a defined-risk trade.
1. Define the bullish thesis
Start with a specific reason the underlying may rise. Write down the expected price target, the event or trend behind the idea and how long the move may take. “The stock will go up” is not enough to choose an option intelligently.
For example, assume a stock trades at $100 and you believe it could reach $112 within six weeks. That target and time window give you a basis for comparing strikes and expirations.
2. Open the option chain
Search for the stock or ETF in an options-enabled brokerage account and open its option chain. Select the calls side. Each row normally shows a strike with bid and ask prices, volume, open interest, implied volatility and Greeks.
- Bid: the highest displayed buying price.
- Ask: the lowest displayed selling price.
- Open interest: contracts currently open.
- Volume: contracts traded during the session.
- Delta: an estimate of price sensitivity to a $1 move in the underlying.
3. Choose an expiration date
The expiration should give the thesis enough time to develop. Near-term options are often cheaper, but their time value can decay quickly. Longer-dated calls cost more, but give the position more time and generally lose time value more slowly on a day-to-day basis.
Avoid choosing an expiration solely because it has the lowest premium. Compare how much time the trade needs with how much capital you are prepared to risk.
4. Compare strike prices
Calls may be in the money, at the money or out of the money. In-the-money calls usually cost more and often have higher delta. Out-of-the-money calls cost less, but require a larger rise to gain intrinsic value by expiration.
| Strike type | Typical premium | General trade-off |
|---|---|---|
| In the money | Higher | More intrinsic value and usually higher delta |
| Near the money | Medium | Balance between cost and price sensitivity |
| Out of the money | Lower | More leverage, but a larger move is required |
There is no universally correct strike. Compare the premium, delta, breakeven and the move required—not just the contract’s sticker price.
5. Calculate the trade’s key numbers
- Stock price: $100
- Call strike: $105
- Premium: $3 per share
- Contract cost: $3 × 100 = $300
- Expiration breakeven: $105 + $3 = $108
- Maximum loss: $300, plus fees
At expiration, the stock must be above $108 for this example to show a net profit before fees. Before expiration, the call’s market value also includes remaining time value and can change with implied volatility.
6. Check liquidity
Review the bid-ask spread, volume and open interest. A wide spread can make entry and exit more expensive. High volume alone is not a guarantee, but active contracts with narrower spreads are generally easier to trade than contracts with little participation.
7. Enter a buy-to-open limit order
Select the exact contract and choose buy to open. Confirm the symbol, expiration, strike, call designation and quantity. A limit order defines the maximum premium you agree to pay; a market order prioritizes execution and can fill at an unfavorable price when spreads are wide.
- Action: Buy to open
- Quantity: Number of contracts
- Order type: Limit
- Limit price: Your maximum premium
- Duration: Day or good-till-canceled, as appropriate
Before submitting, verify the total debit. A quote of $3 normally means $300 for one standard 100-share contract, not $3.
8. Monitor and manage the position
After the order fills, track the underlying price, time remaining, implied volatility and the option’s bid and ask. Decide in advance what would invalidate the thesis and whether you will exit at a target profit, a defined loss, or a particular date.
You do not normally need to exercise to realize a gain. Many traders use a sell to close order before expiration. Selling can preserve remaining time value that may be lost through early exercise.
Common mistakes to avoid
- Buying a cheap, far out-of-the-money call without calculating the required move.
- Selecting an expiration that ends before the thesis has time to develop.
- Ignoring a wide bid-ask spread.
- Using too much account capital on one premium.
- Waiting until expiration without an exit plan.
- Assuming a bullish stock move guarantees an options profit.
Frequently asked questions
How much money do you need to buy a call?
The premium multiplied by the contract multiplier, usually 100 for a standard U.S. equity option, plus fees. A quoted premium of $2.50 generally costs $250 per contract.
Which strike price should a beginner choose?
There is no universal best strike. Compare several strikes by cost, delta, breakeven, liquidity and the size of the required move.
Can you sell the option before expiration?
Yes. A long call can generally be sold to close before expiration during market hours, subject to liquidity.
Continue the Level 1 call option series
Next, learn how to calculate long call profit, loss and breakeven. For guided lessons and platform examples, take the free Level 1 – Buying Call Option course.
Apply the concept: See how these ideas work together in the Bull Call Spread guide, then continue with the free Level 9 course.
Options involve risk and are not suitable for every investor. This article is for educational purposes only and does not constitute investment advice.