February 2, 2007, Newsletter Issue #52: How to buy a call
Tip of the Week
Buying a call is the most basic options trading strategy that you can utilize when expecting an upwards price movement in a particular stock. There are many different methods for choosing an underlying security, but when you buy a call, you are essentially saying that you believe that the underlying stockīs value will increase before the optionīs expiration date.
A couple of things to keep in mind when buying calls:
Options closer to expiration will cost less but also have less time to make the desired price move.
In-the-money options may be more expensive than out-of-the-money options, but out-of-the-money options have no intrinsic value, only time value.
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