Buying Call Options
- 1). Request authorization from your broker to buy call options. Read and then sign a standard options agreement from your broker, and then wait for authority from your broker to buy calls.
- 2). Select from among the various available call options for an asset that interests you, such as shares, stock indexes or commodities. Review your choices by examining the asset's fundamentals, its price history and most importantly your budget, which will constrain the quantity and price range of your purchase. Each stock call contract will cost you 100 times its quoted price -- a call quoted at $2 will cost you $200, because you are buying the right to purchase 100 shares of stock at a fixed price.
- 3). Select one of the call's expiration months, allowing enough time for the call's underlying asset to rise in price. When you own a call, your right to purchase the underlying asset at an agreed price ends on the expiration date. Most call options have at least four increasingly expensive expiration months per year -- more distant expiration dates give the underlying asset (and thus the call) more time to appreciate, which is why calls with distant expiration dates cost more.
- 4). Select the agreed price (known as the call's "strike price") at which your call allows you to purchase the underlying asset. Strike prices are standardized, rising in fixed $5 or $10 increments. Your budget will help dictate your choice because a call with a strike price above the underlying asset's current price -- known as an "out of the money" call -- will cost less than an "at the money" or "in the money" call, in which the asset is selling at or for less than the strike price, respectively.
- 5). Place your order for call options with your broker, either via the phone or a website. Specify whether your order is to be placed at the current market price or limited to a specific maximum price per call. If purchasing more than one call contract, specify whether you are willing to accept a partial fill of the order.
- 6). Receive confirmation of your order's execution, and read the confirmation to verify that your order was executed correctly and at the anticipated price.