Call Options Explained - The Right to Buy

Reviewed by Leon Moyer - Published September 29, 2026 - Last reviewed October 9, 2026

A call option gives its buyer the right, but not the obligation, to buy 100 shares of a stock at the strike price, on or before the expiration date.

People buy calls when they expect a stock to rise. The call lets them participate in that rise for a fraction of the cost of buying the shares outright, with a loss that can never exceed what they paid for the contract. At expiration, a long call breaks even at the strike price plus the premium, loses at most the premium, and has no fixed cap on profit.

How do call options work?

All else being equal, a call is worth more when the stock is higher, because the right to buy at a fixed price becomes more attractive as the market price climbs.

That "all else being equal" matters. Before expiration, the stock price is not the only thing moving an option's price: time passing and changes in implied volatility move it too, and they can outweigh a favorable move in the stock. It is possible for the stock to rise and your call to lose value anyway. The Options Industry Council's option price behavior guide summarizes these forces, and The Option Greeks Explained and How Options Are Priced cover them in depth.

Think about it from the buyer's side. If you own the right to buy XYZ at $50:

• When XYZ trades at $45, your right is not useful today. Why pay $50 for something you can buy for $45?
• When XYZ trades at $60, your right is very useful. You can buy at $50 something the market values at $60.

A call's intrinsic value is the stock price minus the strike price, or zero if the stock is at or below the strike. At expiration, intrinsic value is all the option is worth. A call with intrinsic value is in the money; one whose strike is above the stock price is out of the money, and one whose strike is about equal to it is at the money. In the Money vs Out of the Money covers these terms in depth. Before expiration, calls usually trade for more than their intrinsic value, because there is still time for the stock to move. That extra amount is time value, and Intrinsic and Extrinsic Value covers it.

What are a long call's break-even, maximum loss and maximum profit?

When you buy a call, three numbers tell you most of what you need to know about the trade at expiration.

1. Maximum loss = the premium you paid. If the stock finishes at or below the strike, the call expires worthless and you lose the full premium. You can never lose more than that.
2. Break-even price = strike price + premium per share. The stock has to rise far enough above the strike to pay back what you spent on the option.
3. Maximum profit = unlimited, in theory. There is no ceiling on how high a stock can go, so there is no ceiling on what a call can be worth.

Put together: profit or loss at expiration = (intrinsic value - premium) x 100 for each contract.

Should you buy a call or the shares?

Why buy a call instead of the stock? Mostly because of how much capital is at risk.

To buy 100 shares of XYZ at $48, you would need $4,800. The call in the example controls the same 100 shares for $200.

That difference cuts both ways:

• If XYZ rises to $60, the shareholder makes $1,200 on $4,800, a 25% return. The call buyer makes $800 on $200, a 400% return.
• If XYZ is still at $48 at expiration, the shareholder has lost nothing. The call buyer has lost the entire $200, a 100% loss, simply because the stock did not rise far enough, fast enough.

This is leverage. A call magnifies the percentage outcome in both directions, and it adds a deadline that stock ownership does not have. A stock can take years to recover; a call that expires out of the money is simply gone.

What can you do with a call before it expires?

A call buyer has three choices while the contract is alive:

1. Sell the call to close the position. This is how most retail traders exit: they sell the contract back into the market and keep (or lose) the difference in premium. There is no need to own or buy the shares.
2. Exercise the call and buy 100 shares at the strike price. This requires the cash to pay for the shares (in the example, $50 x 100 = $5,000). Exercising early usually throws away the option's remaining time value, which is why it is uncommon outside of specific situations such as capturing a dividend.
3. Hold to expiration and let it settle. At expiration, a call that is in the money is generally exercised automatically by the clearing process unless you instruct your broker otherwise, which means you could end up owning shares. What Happens When Options Expire? covers exactly how this works and how to avoid surprises.

What does a long call payoff diagram look like?

A long call's payoff diagram is flat at the maximum loss (the premium) at any stock price at or below the strike. Above the strike it rises $100 for every $1 the stock gains, crossing zero at the break-even (strike + premium). That hockey-stick shape is the signature of a long call.

You can draw it yourself in the free OptionsPro profit calculator: add a single long call and move the stock price to watch the profit and loss change. Seeing the shape once makes the numbers above much easier to remember.