Long Call Option Screener

Hi, and welcome to the Options Learning Center. I'm going to show you how to buy calls and use Barchart to get the most out of the strategy.

What is a Long Call?

A call option (or a long call) gives the buyer the right but not the obligation to buy 100 shares of the underlying asset at a specified price (strike price) within or at a specified time (expiration date). The buyer pays for that option through a premium. A buyer of a call option is said to be long, hence the term "long call."

Long Call Strategy

• Long Call is used when you are bullish on the market.
• It gives you the right to buy 100 shares of the underlying asset at a specified strike price.
• The buyer expects the price to rise above strike before the expiration date.
• The buyer aims to profit from price increase.
• The option is valid only before the expiration date.
• The buyer pays the premium.

Call options are used when the buyer is bullish on the market, or the investor has a reason to believe that the underlying asset's price will increase above the strike price on or before the expiration date. As a result, Long Calls aim to profit from the anticipated price rise in a specific stock or underlying asset.

If the option premium exceeds what the buyer paid before expiration, the buyer can sell the call option at a profit.

Alternatively, the buyer can exercise an in-the-money call and buy the underlying shares at the strike price, hold them, or sell them to the market for a profit.

How to Profit Buying Long Calls

• Sell the Option: You profit if the premium is greater than purchase price.
• Exercise the Option: You buy the shares at the strike price.
• Profit: You sell the shares at market price.

Trade Example

Let’s use Barchart for trade examples using long calls.

Entering the Trade

To access the long call screener, simply navigate to Barchart.com, click on the Options tab, and then click on Long Call Screener.

Once there, you are immediately presented with a list of underlying stocks for long call options.

Considerations For Long Calls

Before entering a trade, you need to consider a few things:

First is the strike price. Do you want an in-the-money (ITM) call, which is safer but more expensive, or an out-of-the-money (OTM) call, which is cheaper but riskier?

Next, the Expiration Date. Longer expiration dates allow more time for the underlying security to move upward. Typical long call trades expire in 30 to 45 days, but they could be a lot longer, depending on the strategy.

Lastly is the Premium. With long calls, your maximum loss is the premium you pay, and that loss happens if the underlying stock’s price is at or below your strike price.

Trade Considerations

• Strike Price: ITM (safer, expensive) or OTM (cheaper, riskier)
• Expiration Date: Typically 30-45 days or more
• Premium: Max loss = premium paid

Customizing the Screener

You may prefer to tailor-fit your screener to reflect different strategies and risk profiles.

To customize your screener, click on the Set Filters tab. You can select from dozens of filters, such as option details, analysis, and even underlying stock information.

Use the search box to find a filter, or use the filter category drop-downs to find the data you want to screen for.

There are many default filters are already in place for a long call screener, such as Options Volume and Open Interest, Days to Expiration, and Moneyness.

Traders often consider "ITM Probability" to increase their chances of profit.

While ITM probability does not equate to the probability of making a profit, it gives traders a good idea about the trade's potential direction. To profit with a long call, the underlying stock price must exceed the trade's breakeven price at expiration.

Options traders commonly choose long calls with varying probabilities. Just remember, safer option trades usually mean higher premiums.

ITM Probability Considerations

• Metric Predicts: Chance the call expires ITM
• Trade Direction: Indicates potential
• Profit Requirement: Stock price is greater than breakeven
• Varying Probabilities: Different levels
• Higher Premiums: Safer trades cost more

Screening for Call Options

Here are some recommendations on setting your filters in the Long Call Option Screener.

• ITM Probability: 60% - 70%
• Days to Expiration: 30-45 days

Once you view the results, you'll want to focus in on a target. For this trade example, let's use Apple (AAPL).

Here are our trade details:

This long-call option is a bit conservative, as it’s already in the money. The premium is a little more expensive than out-of-the-money options, but since it already has intrinsic value, it’s a safer trade than buying something more speculative.

Exiting the Trade

Traders can exit long calls by exercising the option (you buy the underlying asset), or by selling the call to someone else.

Exercising Example

• Apple's Price at Expiration: $240
• Exercise Option: Buy 100 shares at $210
• Cost of Trade: $21,000
• Profit on Trade: $3,000
  
  

If the Long Call Expires In-the-Money and You Sell Your Option

Extrinsic (time) value and intrinsic values make up the option’s total premium.

Let’s assume it is July 5 and there are 14 days to expiration. Apple stock is now $240 per share, and you decide to sell the option for a profit.

In this case, your long call is in the money and has an intrinsic value of $30.

• Intrinsic value: $30

However, since it still has 14 days before expiring and has the potential to increase, your long call option will also have extrinsic value, making it more advantageous to sell the option rather than exercise it. Let's say people are willing to pay $10 more.

• Extrinsic value: $10

So, now, you can sell your long call for $40.

To calculate the total profit from selling your long call, take the total premium received from selling the call and subtract the premium paid at the start of the trade.

• $40 - $8.80 = $31.20 x 100
• $3,120 total profit per contract.

If the Long Call Expires Out-Of-The-Money

The trade will enter its maximum loss condition if Apple’s prices move below your long strike. Suppose that happens, and AAPL trades for $190 at expiration.

The maximum loss is calculated by multiplying the premium paid by 100 for every long call option.

$8.80 x 100 = $880

Profit/Loss At Different Price Points

To better illustrate the profit/loss scenarios of a long call, the following table shows your expected returns at different price points, assuming that you exercise the option and sell the shares to the market at expiration.

Screening For Long Calls on Specific Stocks

Suppose you've already identified a good underlying stock you want to buy. Barchart allows you to screen for different option strategies for specific stocks. You can go to the stock or asset's Price Overview page on Barchart.com, navigate to the left-hand side of the screen, and click on Long Call/Put

Another way to do this is to add the Symbol filter on the Long Call Screener page, then search for the company ticker symbol.

Pros & Cons of Buying Call Options

Now, let’s talk about the pros and cons of long calls.

A long call’s strongest benefit is its Unlimited Profit Potential. As the underlying asset's price rises, the call option's value can increase significantly, offering substantial gains.

Long calls also have limited risk and provide leverage by controlling a large amount of the underlying asset for a relatively smaller premium.

Furthermore, long calls can used in various trading strategies, providing flexibility in managing investments and hedging risks.

Lastly, unlike purchasing the underlying asset, buying a call option requires less capital, making it accessible to more investors.

Pros:

• Unlimited Profit Potential: Significant gains as price rises
• Limited Risk: Max loss is the premium
• Leverage: Control large asset amount, smaller premium
• Flexibility: Various strategies, manage investments, hedge risks
• Less Capital: More accessible than buying the asset

However, bought call options lose value as they approach expiration, known as time or theta decay. If the underlying asset's price does not move significantly or quickly enough, this can erode profits. The investor also loses the entire premium paid if the underlying asset's price does not rise before the option expires.

Furthermore, while leverage can amplify gains, it can also amplify losses. High volatility can lead to significant price swings, which might result in the option expiring worthless.

The premium cost can also be high, especially for options with longer expirations or higher implied volatility. This can reduce overall profitability.

Finally, crystal balls don’t work on options trading. Predicting market movements accurately is challenging. If the underlying asset's price remains stagnant or falls, the call option can lose value rapidly.

Cons:

• Time Decay: Value loss near expiration
• Slow Price Rise: Erodes profits
• Premium Loss: Entire premium if price doesn’t rise
• Leverage Risk: Amplifies losses
• High Volatility: Risk of expiring worthless
• High Premiums: Longer expirations, high volatility
• Market Prediction: Difficult to predict
• Stagnant/Falling Price: Rapid value loss

Other Tips

Here are other considerations before trading long calls:

First, do your research. Make sure you understand the underlying asset thoroughly. Research its historical performance, market trends, and price movement factors.

Next, remember to monitor Volatility. High volatility increases option premiums, while low volatility may offer cheaper options but less potential for significant price movement.

Remember to Set Realistic Goals. Have a clear profit target and risk management strategy. Determine in advance at what price you will sell to take profits or cut losses.

Don't forget to track Market Conditions. Stay informed about broader market conditions and economic indicators that could impact the underlying asset. This will help you make timely decisions and trade adjustments.

Use technical analysis tools to identify entry and exit points. Chart patterns, moving averages, and other indicators can provide valuable insights into price movements.

Also be aware of the effects of time decay, especially if you hold options close to their expiration date. This is particularly important for speculative long calls since the closer it is to the expiration date, the lower the premiums.

And finally, don’t trade blind. Utilize options trading platforms and tools like the Barchart Long Call Options Screener and Charting to get analytical insights and risk management features.

• Research Asset: History, trends
• Monitor Volatility: High = costly, low = cheap
• Set Goals: Profit targets, risk management
• Track Market: Economic indicators
• Technical Analysis: Entry/exit points
• Time Decay: Value loss near expiration
• Use Tools: Barchart insights, data

Conclusion

Long calls can be a great way to profit from significant price movements. While the risks are limited, traders are encouraged to maximize their potential profits by utilizing tools like Barchart's Long Call Options Screener and by checking the asset's fundamental and technical properties through the website.