Unit 1 · Level 1 · Calls & puts
Calls: the upside ticket
A CALL is the right to BUY the underlying at the strike price. Say a stock trades at €98 and you pay a €5 premium for a €100-strike call. If the stock rockets to €120, you can buy at €100 what everyone else pays €120 for. If it never climbs above €100, you tear up the ticket and your loss stops at €5.
Free to play. No ads, no token, no account needed to start.
What you get asked
At expiry, a bought call makes a net profit when…
Above the strike the call has value, but you haven't profited until that value also covers what you paid. Strike + premium is the real finish line.
You buy a call with a €100 strike for a €5 premium. At what stock price do you break even at expiry?
Break-even = strike + premium = €100 + €5 = €105. Below that, the call recovers only part of its cost.
Walk the payoff of a €5 call with a €100 strike, from low stock prices to high.
This is the famous hockey-stick payoff: flat loss of the premium until the strike, then profit rising one-for-one with the stock.
At expiry, a call is worth the stock price minus the ___, or zero, whichever is higher.
That max(stock − strike, 0) formula is the call's expiry value. The premium you paid determines profit, not what the option is worth.
You paid €5 for a €100-strike call. The stock closes at €103 at expiry. What happened?
Above the strike but below break-even is the in-between zone: the call pays €3 of your €5 back. Right direction, not enough distance. 🐜
The rest of this unit
The right, not the obligation: the contract at the heart of every option.