Long Call Payoff & Breakeven
🔑 Position summary — Long call
| Item | Formula / Rule | Page’s worked dollar example (Long 1 ABC Sep 75 call @ $6) |
|---|---|---|
| Market sentiment | Bullish — expectation of rising values | Investor expects ABC’s market price to rise above $75 before expiration |
| Right or obligation | Right (not the obligation) to BUY the stock at the strike price | Right to buy ABC stock at $75 per share |
| Maximum gain | Unlimited | At a market price of $100: $1,900 gain |
| Maximum loss | Premium | $600 premium paid (option expires worthless at $73) |
| Breakeven | 🔑 Strike price + premium | $75 + $6 = $81 |
BREAKEVEN TRAP: The page states the formula exactly as Long call breakeven = strike price + premium. Calls add the premium to the strike. (Puts subtract.) This is the single most-tested calculation in the section.
Overview
This chapter covers the fundamentals of long call options contracts. To get comfortable with the language used when discussing options, the page directs the reader to watch a video.
- When an investor goes long a call, they’re bullish on the underlying security’s market price.
- Buying a call gives the holder the right (but not the obligation) to buy the stock at the strike price.
| Market price vs. strike | Status | What the holder does | Result |
|---|---|---|---|
| Market price rises above the strike price | In the money | Can potentially profit by exercising the option | Potential profit |
| Market price stays below the strike price | Out of the money | Won’t exercise | Loss equal to the premium paid |
Definitions
| Term | Definition |
|---|---|
| Bullish | Expectation of rising values |
| Bearish | Expectation of falling values |
The contract being analyzed
Long 1 ABC Sep 75 call @ $6
This contract gives the right to buy ABC stock at $75 per share. The option costs $600 ($6 × 100 shares) and expires on the third Friday in September. The investor is expecting ABC’s market price to rise above $75 before expiration. If it doesn’t, the option expires and the investor loses the $600 premium.
Math-based options questions should be expected on the exam. They typically ask about potential gains, losses, and breakeven values.
Maximum gain
A long call’s maximum gain is unlimited. The contract above allows the investor to buy 100 ABC shares at $75 any time before expiration. If the market price rises, the investor can exercise, buy at $75, and then sell at the higher market price. As the market price keeps rising, the potential profit keeps increasing.
Long call maximum gain = unlimited
For the following examples, assume the investor sells the shares immediately after exercising.
Worked example 1 — market price rises to $100
An investor goes long 1 ABC Sep 75 call @ $6. The market price rises to $100. What is the gain or loss?
Answer = $1,900 gain
Action Result Buy call -$600 Exercise - buy shares -$7,500 Sell shares +$10,000 Total +$1,900 At $100, the call is $25 in the money ($100 − $75). The investor exercises, buys 100 shares for $75 per share, and immediately sells them for $100 per share.
Profit from exercising and selling shares: $25 × 100 = $2,500 Subtract the premium paid: $2,500 − $600 = $1,900
Worked example 2 — market price rises to $81 (breakeven)
Even if ABC’s market price rises above $75, the investor might still not profit if the increase isn’t enough to cover the premium.
An investor goes long 1 ABC Sep 75 call @ $6. The market price rises to $81. What is the gain or loss?
Answer = $0 (breakeven)
Action Result Buy call -$600 Exercise - buy shares -$7,500 Sell shares +$8,100 Total $0 At $81, the call is $6 in the money ($81 − $75). Exercising creates a $600 gain on the shares ($6 × 100), but the investor paid a $600 premium upfront. Those offset, so the result is breakeven.
🔑 When investing in calls, the breakeven can be found using this formula:
Long call breakeven = strike price + premium
With a strike price of $75 and a premium of $6, the breakeven is $81. At this market price, there is no profit or loss.
Worked example 3 — market price rises to $79 (in the money, still a loss)
If the market price doesn’t rise far enough above $75, the investor can still have a loss even though the call is in the money.
An investor goes long 1 ABC Sep 75 call @ $6. The market price rises to $79. What is the gain or loss?
Answer = $200 loss
Action Result Buy call -$600 Exercise - buy shares -$7,500 Sell shares +$7,900 Total -$200 At $79, the call is $4 in the money ($79 − $75). Exercising creates a $400 gain on the shares ($4 × 100), but the $600 premium is larger, so the net result is a $200 loss.
Worked example 4 — market price falls to $73 (expiration)
Expiration is the worst-case outcome for a long option: the investor paid a premium for a contract that is never used.
An investor goes long 1 ABC Sep 75 call @ $6. The market price falls to $73. What is the gain or loss?
Answer = $600 loss
Action Result Buy call -$600 Total -$600 At $73, the call is out of the money because the market price is below the $75 strike price. Exercising would mean paying $75 for a stock that’s available in the market for $73, so the investor lets the option expire. The loss is the premium paid.
Long options can only lose the amount spent on the premium. If exercising would create a loss, the investor will let the option expire.
Long call maximum loss = premium
Worked example 5 — closing transaction
Investors can also perform closing transactions to exit their options before expiration.
An investor goes long 1 ABC Sep 75 call @ $6. After ABC’s market price rises to $79, the premium rises to $9, and the investor performs a closing sale. What is the gain or loss?
Answer = $300 gain
Action Result Buy call -$600 Close call +$900 Total +$300 The option premium increased from $6 to $9. Premiums fluctuate with market conditions, including changes in the underlying stock price.
To find profit or loss on a closing transaction, compare the premium paid to the premium received:
Gain per share: $9 − $6 = $3 Total gain: $3 × 100 = $300
Note the contrast with Worked example 3: at the same $79 market price, exercising produces a $200 loss while the closing sale at a $9 premium produces a $300 gain.
Visual summary
The page presents “a visual summarizing the important aspects of long calls.”
Key points
Long calls
- Bullish investments
- Right to buy the stock at the strike price
Long call formulas
- Maximum gain = unlimited
- Maximum loss = premium
- Breakeven = strike + premium
Sources
Primary/official references for the material in this chapter. Every link was fetched and returned HTTP 200 on 2026-08-15.
| # | Source | Publisher |
|---|---|---|
| 1 | Long call — max loss = premium, unlimited upside, breakeven | OCC / Options Industry Council |
| 2 | Premium = intrinsic + time value; pricing inputs | OCC / Options Industry Council |
| 3 | Listed options contract specs and index options | Cboe |
| 4 | Achievable Series 65 — chapter 1.4.1.6 | Achievable (course text) |