Question 1

When should I buy a call option?

Accepted Answer

Buy calls when you're bullish on a stock and want leveraged upside with capped downside. Choose a strike price near or slightly above the current price (at-the-money or slightly OTM) and give yourself enough time — at least 30-45 days to expiration for swing trades. Avoid far OTM weekly calls as a beginner; they're cheap but rarely profitable.

Question 2

What is a covered call?

Accepted Answer

A covered call is when you own 100 shares of a stock and sell a call option against them. You collect the premium, which provides income, but you cap your upside — if the stock rises past the strike, your shares get called away. It's a popular strategy for generating income on stocks you already hold.

Question 3

What is in the money vs out of the money for calls?

Accepted Answer

A call is in the money (ITM) when the stock price is above the strike price — the option has intrinsic value. A call is out of the money (OTM) when the stock is below the strike — it only has time value. At the money (ATM) means the stock price equals the strike. ITM calls cost more but have a higher probability of profit.

What Are Call Options? Profiting When Stocks Go Up

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