Following on from part one, here is a breakdown of long calls. If you’d like to check out part one: Options Terminology 

Firstly, what is a long call? The purchase of a call option

A call option gives the buyer the right but not the obligation to buy a specified quantity of an Underlying Asset, such as 100 Apple shares, at a pre-agreed price (Strike Price) before or on a specific date (Expiration Date)
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Calls are commonly used by investors as a way to profit if the Underlying Asset value increases, without owning the asset

Example:

Apple shares are trading at $170.00
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I can buy an Apple $175.00 (Strike Price) Call for $3.00 (Premium) that expires on 16th June (Expiration Date)

The contract contains 100 shares, resulting in a total premium of $300.00
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To breakeven, Apple would need to increase to $178.00 (Strike Price + Premium) by expiration and anything above this would be considered profit

By expiration, if Apple’s shares are trading at $190.00, I have the right to buy 100 shares for $175.00 each

If I exercise my right to buy the shares for $175.00 and then sell them for $190.00, I have made $15.00 on each share

I have made $15.00 but paid $3.00 Premium for the call, so my profit is $12.00 on each share

Total Proceeds: $1,500.00

Total Premium: $300.00

Total Profit: $1,200.00

Remember!

When investing you may incur additional costs such as broker and exchange fees

Capital at risk when investing