1const t=`<div class="strategy-article"> 2 <div class="strategy-highlights"> 3 <h3 class="strategy-highlights__heading">Strategy Highlights</h3> 4 <ul class="strategy-highlights__items"> 5 <li class="strategy-highlights__item"> 6 <div class="strategy-highlights__item-heading"> 7 <div class="strategy-highlights__item-icon-wrapper"> 8 <img 9 class="strategy-highlights__item-icon" 10 src="https://www.optionseducation.org/img/content-images/strategy-icons/motivation.svg" 11 alt="Motivation" 12 /> 13 </div> 14 <div class="strategy-highlights__item-title">Motivation</div> 15 </div> 16 <div class="strategy-highlights__item-description"> 17 Positioning to profit from an increase in the level of the underlying index. 18 </div> 19 </li> 20 <li class="strategy-highlights__item"> 21 <div class="strategy-highlights__item-heading"> 22 <div class="strategy-highlights__item-icon-wrapper"> 23 <img 24 class="strategy-highlights__item-icon" 25 src="https://www.optionseducation.org/img/content-images/strategy-icons/bullish-outlook.svg" 26 alt="Bullish Outlook" 27 /> 28 </div> 29 <div class="strategy-highlights__item-title">Bullish Outlook</div> 30 </div> 31 <div class="strategy-highlights__item-description"> 32 Anticipating an advance in the broad market or market sector measured by the underlying index in the near 33 future 34 </div> 35 </li> 36 </ul> 37 </div> 38 <div class="strategy-article-description"> 39 <h1>Buying Index Calls</h1> 40 <h3>Goal: Positioning to profit from an increase in the level of the underlying index.</h3> 41 <div class="description"> 42 <h3 id="h3-item-2">Description</h3> 43 <p> 44 <b>Market Outlook:</b> <b href="/referencelibrary/optionsglossary?filter=B">Bullish</b> over the short 45 term. 46 </p> 47 48 <p><b>Goal:</b> Positioning to profit from an increase in the level of the underlying index.</p> 49 50 <ul> 51 <li> 52 You are anticipating an advance in the broad market or market sector measured by the underlying index in the 53 near future. 54 </li> 55 <li>You want to take an aggressive position that can provide a great deal of leverage.</li> 56 <li> 57 You make this decision aware of the possibility that you may lose the entire premium you pay for the option. 58 </li> 59 </ul> 60 61 <p> 62 An index call option gives the purchaser the right to participate in underlying index gains above a 63 predetermined strike price until the option expires. The purchaser of an index call option has unlimited profit 64 potential tied to the strength of advances in the underlying index.<br /> 65 66 </p> 67 68 <div class="strategybg"> 69 <div class="strategyimg image"> 70 <figure class="figure--right"> 71 <img 72 alt="Long Index Call P&L chart; Long call at 205 (red dot); Max loss $475, Unlimited profit above 209.75" 73 height="260px" 74 src="https://www.optionseducation.org/getmedia/d5b272c2-7a00-4f55-9990-0fdbad7b483c/Buying-Index-Call_PnL_final_approved.png?width=260&height=260" 75 title="Long Index Call P&L chart" 76 width="260px" 77 /> 78 <figcaption>Net Position (at expiration)</figcaption> 79 </figure> 80 </div> 81 <h3 id="h3-item-3">Scenario</h3> 82 83 <p> 84 Assume that XYZ symbolizes the underlying index that interests you and it is currently at a level of 200. You 85 decide to purchase a 6-month XYZ 205 call for a quoted price of $4.75 per contract. Your net cost for this 86 call is $475 ($4.75 x 100 multiplier). You are risking $475 if the underlying index level is not above the 87 strike price of 205 when the XYZ call expires. 88 </p> 89 90 <p> 91 The <b>break-even point</b> (BEP) at expiration is an XYZ index level of 209.75 (strike price 205 + 92 premium paid $4.75) because the call will be worth its <b>intrinsic value</b> of $4.75, which is 93 what you originally paid for it. The higher the XYZ index settlement value is above the break-even point at 94 expiration, the greater your profit. 95 </p> 96 97 <h3 id="h3-item-4">Possible Outcomes at Expiration</h3> 98 99 <p><b>1. XYZ index level above the break-even point (209.75):</b></p> 100 101 <p> 102 If at expiration XYZ index has advanced to 215, the XYZ 205 call will be worth its intrinsic value of $10 103 (settlement value 215 - strike price 205). Your net profit in this case would be $525 (settlement amount $1000 104 received from exercise - net cost of call $475). 105 </p> 106 107 <table> 108 <tbody> 109 <tr> 110 <th colspan="4">Buy XYZ index 205 Call at $4.75 with index at 200 net cost for call = $475</th> 111 </tr> 112 <tr> 113 <th>Level of XYZ index at expiration</th> 114 <td>XYZ index declines to 198 (below strike)</td> 115 <td>XYZ index advances to 207 (between strike and BEP)</td> 116 <td>XYZ index advances to 215 (above BEP)</td> 117 </tr> 118 <tr> 119 <th>Move in level of index</th> 120 <td>down 2 pts.</td> 121 <td>up 7 pts.</td> 122 <td>up 15 pts.</td> 123 </tr> 124 <tr> 125 <th> 126 Value of call at expiration<br /> 127 (per contract) 128 </th> 129 <td>0 (out-of-the-money)</td> 130 <td>$2</td> 131 <td>$10</td> 132 </tr> 133 <tr> 134 <th>Less premium paid for call</th> 135 <td>$4.75</td> 136 <td>$4.75</td> 137 <td>$4.75</td> 138 </tr> 139 <tr> 140 <th> 141 Net profit/loss*<br /> 142 (per contract x 100) 143 </th> 144 <td>â$475</td> 145 <td>â$275</td> 146 <td>$525</td> 147 </tr> 148 </tbody> 149 </table> 150 151 <p>*Exclusive of commissions, transaction costs and taxes.</p> 152 153 <p><b>2. XYZ index level between strike price (205) and break-even point (209.75):</b></p> 154 155 <p> 156 If at expiration XYZ index has advanced to 207, the XYZ 205 call will be worth its intrinsic value of $2.00 157 (settlement value 207 - strike price 205). You could exercise the option and receive the settlement amount of 158 $200 ($2.00 intrinsic value x 100 multiplier). This amount would be less than the net amount paid for the call 159 ($475), but it would offset some of that cost. The net loss in this case would be $275 (net cost of call $475 160 - settlement amount $200 received from exercise). This loss represents a little more than half of your initial 161 investment. 162 </p> 163 164 <p><b>3. XYZ index level below strike price (205):</b></p> 165 166 <p> 167 If at expiration XYZ index has declined to 198, the call would have no value because it is out-of-the-money. 168 You will have lost all of your initial investment, a net of $475. The net premium paid for an index option 169 represents the maximum loss for an option purchaser. 170 </p> 171 172 <p><b>Note:</b> No matter how far XYZ declines below the strike price, the loss will not exceed $475.</p> 173 </div> 174 </div> 175 </div> 176</div> 177`;export{t as default};
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