Strategy-Buy Call

Strategy-Buy Call - Unlimited When does maximum possible...

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Strategy: Buy Call Description:  A long call gives you the  right to buy the underlying stock at a  particular strike price. The strategy can  be used as an alternative to buy stock. Position(s):  1) Buy a Call  When should one use it?  When one expects the stock price to  increase Confidence in the  analysis/information:  Low for in the  money and high for out of the money Break Even:  Stock price equals strike price plus the  cost of call or S = X+c Maximum Possible Loss:   Premium paid =c When does maximum possible loss  occur?  Stock price is less than strike  price Maximum Possible Profit: 
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Unformatted text preview: Unlimited When does maximum possible profit occur/ (what do want the stock price to do): Stock price should go through the roof. Are there any margin Requirement if the trade is paid for: No Time Decay (Assuming nothing else changes what happens as time to maturity approaches): It will negatively affect our position Implied Volatility (Assuming nothing else changes what happens if stock volatility increases): Increases the value of the position prior to the expiration Delta: Positive Gamma: Positive Additional Information:...
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This note was uploaded on 02/27/2010 for the course FIN 311 taught by Professor Haan during the Spring '10 term at St. Josephs NY.

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Strategy-Buy Call - Unlimited When does maximum possible...

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