Buying — A Call Option

Leo’s option was now "in the money." Because he held the $160 strike call, he could technically buy the shares for $160 and immediately sell them for $200, netting a massive profit. Alternatively, he could simply sell the option itself, which had climbed in value from $5 to over $40.

He clicked "Sell to Close," watching his initial turn into $4,000 . He hadn't needed $15,000 to participate in the gain; he just needed a well-timed contract and a bit of leverage . buying a call option

"There," Leo thought. "I’ve bought the , but not the obligation , to buy those shares at $160, no matter how high the price goes." Leo’s option was now "in the money

He opened his brokerage app and selected the call with an expiration date two months away. The premium was $5 per share. Since one option contract represents 100 shares , he paid $500. He hadn't needed $15,000 to participate in the

Leo sat in his home office, staring at the ticker for . The stock was trading at $150 , but with a major product launch scheduled for next month, Leo was convinced it would skyrocket. He didn't want to buy 100 shares outright—that would cost him $15,000. Instead, he decided to buy a call option .

Three weeks later, the product launch was a sensation. Nebula Tech’s stock surged to .