What is a Call Option?

Before we go to the ‘How to buy a call option’ guide, let’s quickly recap what a call option is. As the name suggests, a call ‘option’ is a contract that gives you the option of buying 100 shares of a stock at a pre-determined price. You can choose to exercise the option or choose not to exercise the option to buy those 100 shares.

When you buy a call option, you buy the contract that will allow you to buy 100 shares of a stock at a fixed price (called strike price). But, this contract is not valid indefinitely, it comes with an expiration date. The expiration date and the strike price play a crucial role in determining in the price (premium) of the contract.

For more details and basic terminology, check out the following articles: Call Options and Stock Options

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Why Buy a Call Option?

Call options provide investors a financial leverage. For example, if you believe a stock trading at $100 today has huge upside potential, you can do a couple of things

  • you can buy some shares of the stock at the price of $100/share and wait for the stock price to rise.
  • you can gain financial leverage by buying a call option to tap the upside potential of the stock.

Case 1 is fairly straightforward. If you want to look at how to buy stocks, read this: how to buy your first stock.

Case 2 is what we will discuss in this article.

how to buy call option

If you are convinced that the stock price will rise within the next few days, weeks or months, you can choose a call option with the most suitable expiration date + strike price and bet on the upside of the stock by paying a premium. The premium for the call option is generally a fraction of the cost of actually buying 100 shares, hence giving you financial leverage we talked about earlier.

Need a primer on investing in the stock market? See below:

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How to Buy a Call Option on Robinhood (Video)

How to Buy a Call Option on Robinhood (Step by Step Guide)

Step 1. Search for the stock for which you want to buy the call option. For demo, we are looking at the Apple stock (AAPL). Click on the stock name to proceed with the selection.

how to buy a call option on robinhood

Search for the stock for which you want to buy the call option. For demo, we are looking at the Apple stock (AAPL). Click on the stock name to proceed with the selection.

Step 2. Click on the ‘Trade’ button at the bottom right on the screen.

how to buy a call option on robinhood

Click on the ‘Trade’ button at the bottom right on the screen.

Step 3. A small menu will up, select ‘Trade Options’ on the menu.

how to buy a call option on robinhood trade options

A small menu will up, select ‘Trade Options’ on the menu.

Step 4. Now the main Option Trading screen will appear.

4a. On the top row there is a list of expiration dates, you can slide right and left to pick an expiration date.

4b. On the buttons right below the expiration dates, select ‘Buy’ and ‘Call’

Note that the current stock price is also indicated, ‘Share Price: $129.14’.

The Call Options with ‘Strike Prices’ greater than the current share price ($129.14) are called ‘Out of Money Call Options’. Here, on the screenshot we can see Out of Money Call Options with Strike Prices $130, $135, $140. To view more strike prices, you can scroll up and down.

The Call Options with ‘Strike Prices’ less than the current share price ($129.14) are called ‘In The Money Call Options’. Here, on the screenshot we can see In The Money Call Options with Strike Prices $125, $120, $115. To view more strike prices, you can scroll up and down.

how to buy a call option on robinhood in the money out of money call options

Now the main Option Trading screen will appear.

a. On the top row there is a list of expiration dates, you can slide right and left to pick an expiration date.

b. On the buttons right below the expiration dates, select ‘Buy’ and ‘Call’


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How to Buy an In The Money Call Option on Robinhood

Continuing from step 1-4 described above.

Step 5. Select an In the Money Call Option. For demo, we are selecting the call option with Strike Price $125 (which is less than the current share price of $129.14)

how to buy in the money call option on robinhood

Select an In the Money Call Option. For demo, we are selecting the call option with Strike Price $125 (which is less than the current share price of $129.14)

Step 6. After selecting the call option, on the next screen, fill in the order details such as number of contracts you want to buy (1 contract is for 100 shares) and the price you want to pay per share. Hit Review when ready.

For demo, we are buying 1 contract with a limit price of $31 per share. Our total cost of the order would be 1 contract * $31 per share * 100 shares per contract = $3,100.

how to buy a call option on robinhood

After selecting the call option, on the next screen, fill in the order details such as number of contracts you want to buy (1 contract is for 100 shares) and the price you want to pay per share.

Hit Review when ready.

Some Quick Math on the Call Option with Strike Price $125

The breakeven point point of this call option contract would be $125 + $31 = $156. If Apple stock rises above the breakeven point, the investor makes profits. Technically with every dollar increase above $156, the investor makes $100 (assuming investor buys 1 contract of 100 shares). So, simply speaking, if the Apple stock rises to $200 before the expiry date (3/17/2023), the investor can make $200 – $156 = $44 profit per share or $4,400 per contract (i.e. $44 * 100 shares) on an investment of just $3,100.

On the flip side, if the stock price stays at or below the Strike Price ($125), the investor loses all the money, i.e. $3,100 paid to buy the call option contract.

Step 7. Check the Order Summary and if everything looks fine, swipe up to submit the order.

how to buy a call option on robinhood

Check the Order Summary and if everything looks fine, swipe up to submit the order.


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How to Buy an Out of Money Call Option on Robinhood

Continuing from step 1-4 described above.

Step 5. Select an Out of Money Call Option. For demo, we are selecting the call option with Strike Price $160 (which is much more than the current share price of $129.15, as shown on the bottom of the screen)

how to buy out of money call option on robinhood

Select an Out of Money Call Option. For demo, we are selecting the call option with Strike Price $160 (which is much more than the current share price of $129.15, as shown on the bottom of the screen)

Step 6. After selecting the call option, on the next screen, fill in the order details such as number of contracts you want to buy (1 contract is for 100 shares) and the price you want to pay per share. Hit Review when ready.

For demo, we are buying 1 contract with a limit price of $19 per share. Our total cost of the order would be 1 contract * $19 per share * 100 shares per contract = $1,900.

how to buy a call option on robinhood

After selecting the call option, on the next screen, fill in the order details such as number of contracts you want to buy (1 contract is for 100 shares) and the price you want to pay per share.

Hit Review when ready, double check order details and swipe up to submit the order.

Some Quick Math on the Call Option with Strike Price $160

The breakeven point point of this call option contract would be $160 + $19 = $179. If Apple stock rises above the breakeven point, the investor makes profits. Technically with every dollar increase above $179, the investor makes $100 (assuming investor buys 1 contract of 100 shares). So, simply speaking, if the Apple stock rises to $200 before the expiry date (3/17/2023), the investor can make $200 – $179 = $21 profit per share or $2,100 per contract (i.e. $21 * 100 shares) on an investment of just $1,900.

On the flip side, if the stock price stays at or below the Strike Price ($160), the investor loses all the money, i.e. $1,900 paid to buy the call option contract.

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How to Buy a Call Option on WeBull (Step by Step Guide)

Step 1. Click on the ‘Webull’ button at the bottom of the screen, and then click on the ‘Quick Trade’ button.

how to buy a call option on webull

Click on the ‘Webull’ button at the bottom of the screen, and then click on the ‘Quick Trade’ button.

Step 2. A search bar appears at the top of the page. Look for the stock for which you want to buy the option. For demo, we are searching for Apple (AAPL) stock.

how to buy a call option on webull

A search bar appears at the top of the page. Look for the stock for which you want to buy the option. For demo, we are searching for Apple (AAPL) stock.

Good to Know: Webull allows investors access to multiple levels of option trading. Here is a screenshot of all option trades available to Level 3 investors. Buying a call option should be available to even a Level 1 option trader.

how to buy a call option on webull level 3

Webull allows investors access to multiple levels of option trading. Here is a screenshot of all option trades available to Level 3 investors. Buying a call option should be available to even a Level 1 option trader.

Good to Know: Webull allows users to configure their trade screen. Based on how you have configured it, your screen might look different from the one used in demo.

Here’s the settings used for demo. You can change your screen settings by clicking the ‘hexagon with a dot’ icon on top right (see screenshot in next step).

how to buy a call option on webull screen configuration

Webull allows users to configure their trade screen. Based on how you have configured it, your screen might look different from the one used in demo.

Here’s the settings used for demo. You can change your screen settings by clicking the ‘hexagon with a dot’ icon on top right.

Step 3: On the Create Order screen, look for the ‘Options’ button on bottom right and click on it.

how to buy a call option on webull

On the Create Order screen, look for the ‘Options’ button on bottom right and click on it.

Step 4: The Options Trading screen looks like this. Click on the Expiration Date to open a list of all expiration dates.

  • In the top left, there is the expiration date.
  • In the top center, there is the number of days between today and the expiration date.
  • On the top right, we can see the type of option. We want to make sure it is ‘Calls’ because we are interested in buying a Call Option
  • In the center of the screen, there is a horizontal bar with the current stock price. The call options above that bar have strike price lower than the current stock price, hence are ‘In The Money’ call options. The call options below the horizontal bar have strike price higher than the current stock price, hence are ‘Out of Money’ call options.
how to buy a call option on webull in the money and out of money

The Options Trading screen looks like this. Click on the Expiration Date to open a list of all expiration dates.

Step 5: Choose the desired expiration date. For demo we are choosing the furthest available date on the list, i.e. 17 March 2023.

how to buy a call option on webull expiration date

Choose the desired expiration date. For demo we are choosing the furthest available date on the list, i.e. 17 March 2023 (which is 795 days into the future, as indicated by 795D).

Step 6: The list of all relevant call options with the chosen expiry date will open up.

how to buy a call option on webull

The list of all relevant call options with the chosen expiry date will open up.


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How to Buy In The Money Call Option on Webull

Continuing from Steps 1-6 described above.

Step 7: Choose a call option with strike price less than the current stock price. For demo, we are choosing the $125 Strike Price (which is less than the stock price $128.76) which is ‘In The Money’.

Confirm the following details at the bottom of the screen

  • Call Option – Expiration Date and Strike Price
  • Buy button is highlighted

Click on ‘Edit’ to configure the order

how to buy in the money call option on webull

Choose a call option with strike price less than the current stock price. For demo, we are choosing the $125 Strike Price (which is less than the stock price $128.76) which is ‘In The Money’.

Step 8: Configure the buy order on this screen.

8a. Choose Order Type: We are choosing ‘Limit Order’ and setting a Limit price of $30.65

The ‘Bid-Ask’ spread bar can be used to see at what prices people are trying to buy and the sell the same call option.

8b. Enter No. of Contracts you want to buy: We are buying 1 contract (of 100 shares)

8c. Select Time in Force: We are choosing ‘Day’ as our order validity.

8d. Hit ‘Buy’ button

how to buy in the money call option on webull

Configure the buy order on this screen.

a. Choose Order Type: We are choosing ‘Limit Order’ and setting a Limit price of $30.65

b. Enter No. of Contracts you want to buy: We are buying 1 contract (of 100 shares)

c. Select Time in Force: We are choosing ‘Day’ as our order validity.

d. Hit ‘Buy’ button

Step 9: Double check the details and hit confirm to submit your order.

Make sure you are buying the call option for the right stock, for the right expiration date, with the right strike price, by paying the desired premium ($3,065 = $30.65 * 100).

how to buy in the money call option on webull

Double check the details and hit confirm to submit your order.

Make sure you are buying the call option for the right stock, for the right expiration date, with the right strike price, by paying the desired premium ($3,065 = $30.65 * 100).


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How to Buy Out of Money Call Option on Webull

Continuing from Steps 1-6 described above.

Step 7: Choose a call option with strike price more than the current stock price. For demo, we are choosing the $160 Strike Price (which is more than the stock price $128.76) which is ‘Out of Money’.

Confirm the following details at the bottom of the screen

  • Call Option – Expiration Date and Strike Price
  • Buy button is highlighted

Click on ‘Edit’ to configure the order

how to buy out of money call option on webull

Choose a call option with strike price more than the current stock price. For demo, we are choosing the $160 Strike Price (which is more than the stock price $128.76) which is ‘Out of Money’.

Step 8: Configure the buy order on this screen.

8a. Choose Order Type: We are choosing ‘Limit Order’ and setting a Limit price of $19.25

The ‘Bid-Ask’ spread bar can be used to see at what prices people are trying to buy and the sell the same call option.

8b. Enter No. of Contracts you want to buy: We are buying 1 contract (of 100 shares)

8c. Select Time in Force: We are choosing ‘Day’ as our order validity.

8d. Hit ‘Buy’ button

how to buy out of money call option on webull

Configure the buy order on this screen.

a. Choose Order Type: We are choosing ‘Limit Order’ and setting a Limit price of $19.25

b. Enter No. of Contracts you want to buy: We are buying 1 contract (of 100 shares)

c. Select Time in Force: We are choosing ‘Day’ as our order validity.

d. Hit ‘Buy’ button

Step 9: Double check the details and hit confirm to submit your order.

Make sure you are buying the call option for the right stock, for the right expiration date, with the right strike price, by paying the desired premium ($1,925 = $19.25 * 100).

how to buy out of money call option on webull

Double check the details and hit confirm to submit your order.

Make sure you are buying the call option for the right stock, for the right expiration date, with the right strike price, by paying the desired premium ($1,925 = $19.25 * 100).


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Is Buying a Call Option Risky?

Yes, Call Options carry asymmetric risk, i.e. on one side, if the stock goes above the breakeven point the upside is unlimited. Every dollar increase in price above the breakeven point theoretically brings $100 in additional profits for the investor. On the flip side, in case the stock price remains below the strike price, the investor loses all the money paid to buy the call option.

Though, it’s worth noting that the investor doesn’t lose any more money even if the stock price crashes to zero. For him or her, the loss is capped at the premium paid for the call option contract. The loss is same whether the stock stays at strike price or further crashes down to a lower price.

We Trust The Guide on ‘How to Buy a Call Option’ was Helpful.

As always, do your due diligence, understand the risks, and make informed investing decisions.

Happy investing!


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