Long Calls and Puts: A Beginner-Friendly Guide to Buying Options
Education only. Options involve risk. Not investment advice.
TL;DR (Human Version)
Buying a call means you’re betting a stock goes up. Buying a put means you’re betting it goes down. You pay a fixed upfront cost called the premium, which is also the most you can lose, and you profit only if the stock moves far enough — fast enough — in your direction. The three things that matter most are the strike price, the expiration date, and how much time decay you’re fighting.
What It Actually Means to Buy an Option
When you buy an option, you’re not buying stock — you’re buying the right to act later. A call gives you the right to buy shares at a fixed price, while a put gives you the right to sell shares at a fixed price, all before a specific expiration date. You’re paying for flexibility, leverage, and time — not ownership.
Options are contracts tied to 100 shares of stock, which is why prices are quoted “per share” but charged in $100 multiples. If you pay $2.00 for an option, you’re really paying $200 for that contract.
Long Calls, Explained Without the Jargon
A long call is a bullish trade. You buy it when you believe a stock will rise above a certain price before a certain date.
If the stock keeps climbing, your upside is theoretically unlimited, because there’s no cap on how high a stock can go. If you’re wrong, the worst-case scenario is simple and predefined: you lose the premium you paid.
For example, if a stock is trading at $100 and you buy a $105 call for $2.00, your breakeven is $107. If the stock never gets there, the option expires worthless. If the stock runs to $120, the option becomes valuable very quickly — and that leverage is the entire appeal.
Long Puts, Explained the Same Way
A long put is the bearish mirror image of a call. You buy it when you expect a stock to fall below a certain price before expiration.
Your risk is still limited to the premium you pay, but your profit is capped because a stock can only fall to zero. That said, sharp selloffs can make puts incredibly profitable in a short amount of time.
If a stock is at $100 and you buy a $95 put for $2.00, you need the stock below $93 to break even. A drop to $80 turns a small upfront cost into a sizable gain, while a flat or rising stock causes the option to decay toward zero.
Why Traders Use Options Instead of Stock
Options are popular because they let you control risk and capital more precisely than stock alone.
With leverage, you can gain exposure to 100 shares for a few hundred dollars instead of tying up thousands. With defined risk, you always know your maximum loss before entering the trade. And with puts, you can hedge existing positions the same way insurance protects a house — you hope you never need it, but it’s there if things go wrong.
Some traders also use options for short-term speculation around events like earnings, product launches, or macro news, where stock movement matters more than long-term fundamentals.
The Few Terms You Actually Need to Understand
The strike price is the price at which you can buy or sell shares if you choose to exercise the option. The expiration date is the deadline — after this, the option ceases to exist.
The premium is what you pay to buy the option, and it represents both your cost and your maximum possible loss. Intrinsic value is how much the option is already “in the money,” while extrinsic value is everything else — time and volatility — which slowly decays as expiration approaches.
Breakeven simply tells you how far the stock must move for the trade to stop losing money.
Choosing a Strike Price Without Overthinking It
Strike selection is where beginners either play it safe — or accidentally gamble.
In-the-money options cost more, but they behave more like stock and have a higher probability of profit. At-the-money options offer a balance between cost and responsiveness, making them the most common choice for directional trades. Out-of-the-money options are cheaper and offer higher percentage returns, but they require larger, faster moves and often expire worthless.
Strike Selection Comparison
| Strike Type | Delta Range | Cost | Probability of Profit | Best For |
|---|---|---|---|---|
| Deep ITM | 0.80-0.95 | High | ~80-95% | Stock replacement, conservative |
| ITM | 0.60-0.80 | Moderate-High | ~60-80% | Balanced risk/reward |
| ATM | 0.45-0.55 | Moderate | ~50% | Standard directional trades |
| OTM | 0.20-0.40 | Low | ~20-40% | Leveraged speculation |
| Far OTM | 0.05-0.20 | Very Low | ~5-20% | Lottery tickets (usually avoid) |
Cheap options are cheap for a reason. The lower the cost, the lower the odds.
Picking an Expiration Date That Doesn’t Fight You
Time works against option buyers. Every day that passes without movement chips away at the option’s value through theta decay.
Weekly options move fast and decay brutally, which makes them unforgiving for beginners. Monthly options — typically 30 to 45 days out — give your idea time to play out without bleeding value too quickly. Long-dated options (LEAPS) behave more like stock substitutes and are useful for long-term theses.
A good rule of thumb is to buy at least twice as much time as you think you need.
Understanding Breakeven Without a Spreadsheet
For calls, breakeven is simply the strike price plus the premium you paid. For puts, it’s the strike price minus the premium.
Above breakeven on a call, or below breakeven on a put, every dollar of stock movement translates into real profit. Before breakeven, you’re still digging out of the cost of entry.
Breakeven Examples
| Option Type | Stock Price | Strike | Premium | Breakeven | Required Move |
|---|---|---|---|---|---|
| Call | $100 | $100 | $3.00 | $103.00 | +3% |
| Call | $100 | $105 | $1.50 | $106.50 | +6.5% |
| Put | $100 | $100 | $3.00 | $97.00 | -3% |
| Put | $100 | $95 | $1.50 | $93.50 | -6.5% |
Pro tip: Before entering, calculate the percentage move required to break even. If the stock needs to move 10% in 30 days, ask yourself how often that actually happens.
Risk Management (This Is the Part That Matters)
Most options expire worthless. That’s not a scare tactic — it’s just math.
Smart traders control risk through position sizing first. A common rule is risking no more than 1–5% of your account on any single trade, assuming the option could go to zero. Stops are usually managed manually, either by cutting losses at a predefined percentage or exiting when time runs out and the thesis hasn’t worked.
Profit targets matter just as much. Without them, winning trades often turn into losers. Many traders take partial profits when an option doubles, locking in gains while keeping upside exposure.
Buying Options on Robinhood
Robinhood is optimized for simplicity, which makes it the default choice for most beginners.
To buy a call or put, you search for the stock, tap Trade Options, and select your expiration date. From there, toggle to Buy and choose either Call or Put depending on your directional bet. Pick your strike, review the premium and breakeven, and submit your order — preferably as a limit order to avoid overpaying.
Robinhood shows all five Greeks when you tap into a contract, but the interface requires you to check them one at a time rather than scanning across a full chain. That’s fine for simple trades, but limiting if you want to compare multiple strikes quickly.
Closing a position works the same way in reverse. Navigate to your portfolio, tap the option, and sell to close. Robinhood doesn’t support one-click rolls, so extending an expiration means closing and reopening manually.
The main advantages are zero commissions and a clean mobile experience. The main drawbacks are limited order types, no automation, and no paper trading. For casual directional trades, it works. For anything more sophisticated, you’ll eventually outgrow it.
Buying Options on Tradier
Tradier is built for traders who want more control, whether that means advanced order types, API access, or integration with third-party platforms like Option Alpha.
The web interface (TradePro) displays the full options chain with Greeks visible across all strikes at once. You can compare delta, theta, and vega side by side without clicking into each contract. Orders support limit, market, stop, and conditional logic like one-triggers-other or one-cancels-other — useful for automating profit targets and stop losses.
Tradier also offers paper trading, which lets you practice strategies without risking real capital. That alone makes it a better learning environment than Robinhood.
Commissions are $0.35 per contract on the standard plan, or $0 with a $10/month Pro subscription. For active traders placing more than 30 contracts a month, the subscription pays for itself.
The API is the real differentiator. If you want to scan for setups, automate entries, or build custom alerts, Tradier gives you programmatic access to quotes, chains, and order execution. Robinhood doesn’t.
When Buying Calls or Puts Actually Makes Sense
Calls make sense when you’re bullish and volatility is reasonable — especially near technical breakouts or before positive catalysts. Puts shine when stocks break support, when sentiment shifts bearish, or when you’re hedging an existing portfolio.
Options are least attractive when volatility is extremely high, when there’s no clear thesis, or when you’re buying time you don’t actually need.
The Psychology Most Beginners Ignore
Most traders sell winners too early and hold losers too long. That’s human nature.
The fix isn’t willpower — it’s rules. Decide your exits before you enter, and follow them mechanically. Options punish hesitation far more than they punish being wrong.
Final Thought
Long calls and puts are the simplest options strategies, but they are not easy. They reward preparation, patience, and risk control — and punish hope, impatience, and oversized bets.
If you treat options like structured risk instead of lottery tickets, they can be powerful tools. If you treat them like scratch-offs, the market will happily take your premium.
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Disclaimer: This is education only. Options trading involves significant risk and is not suitable for all investors. Consult a financial advisor before trading.