Loading
Market Intelligence › Blogs And Updates
Understand what a call option is — strike price, premium, profit calculation and real examples. A complete call option guide for beginners.
Published by The Retail Trader · AUG 03, 2026 · Features
Understand what a call option is — strike price, premium, profit calculation and real examples. A complete call option guide for beginners.
A call option is a contract that gives you the right to buy a stock/index at a pre-decided price (the strike price) — but not the obligation. You pay a premium for this right.
In simple words:
• You think Reliance's price will go up
• You buy a ₹2,900 strike Call at a ₹30 premium
• If Reliance reaches ₹2,950 → your profit = ₹20/share (₹50 - ₹30)
• If Reliance stays at ₹2,850 → your loss = ₹30 (only the premium)
Call option = Bullish view. You expect the price to go up.
Strike Price:
• The price at which you buy the right to buy the stock
• Example: Reliance is currently ₹2,850. Strike ₹2,900 = you can buy at ₹2,900
Premium:
• The price of the call option (what you have to pay now)
• Premium = Intrinsic Value + Time Value
• Example: ₹30 premium = ₹10 intrinsic + ₹20 time value
Expiry Date:
• The date on which the option expires
• NSE stock options: monthly expiry on the last Tuesday
• Nifty: weekly expiry every Tuesday + monthly on the last Tuesday; Bank Nifty: monthly only (last Tuesday)
Lot Size:
• How many shares in one contract
• Nifty: 50 shares/lot
• Bank Nifty: 15 shares/lot
• Stock options: varies (e.g., Reliance: 250 shares/lot)
Nifty at 24,600:
Keep these three points in mind:
• ITM (In The Money) — Strike: Below spot, Example: 24,500 CE, Premium: ₹150, Probability: Higher (has intrinsic value)
• ATM (At The Money) — Strike: At spot, Example: 24,600 CE, Premium: ₹80, Probability: Medium
• OTM (Out of The Money) — Strike: Above spot, Example: 24,700 CE, Premium: ₹40, Probability: Lower (only time value)
Beginners: buy ATM or slightly ITM calls. OTM is cheap, but 70% of OTM options expire worthless.
Cost: ₹80 × 50 shares = ₹4,000 (total premium paid)
Keep these seven points in mind:
• 24,400 — Value: 0, Profit/Loss: -₹4,000 (max loss)
• 24,500 — Value: 0, Profit/Loss: -₹4,000
• 24,600 — Value: 0, Profit/Loss: -₹4,000
• 24,680 — Value: 0, Profit/Loss: -₹4,000 (breakeven)
• 24,700 — Value: ₹5,000, Profit/Loss: +₹1,000
• 24,800 — Value: ₹10,000, Profit/Loss: +₹6,000
• 24,900 — Value: ₹15,000, Profit/Loss: +₹11,000
Breakeven: Strike + Premium = 24,600 + 80 = 24,680
Max loss: Premium paid = ₹4,000 (limited) Max profit: Unlimited (as high as the price goes)
Ideal Conditions:
• You have a bullish view on the stock/index
• Low volatility (VIX < 15) — options will be cheaper
• Enough time to expiry (5-7+ days remaining)
• High volume on that strike (liquidity)
• Nifty trend bullish (market support)
Avoid When:
• VIX > 20 (options are expensive)
• Expiry within 2 days (theta decay is fast)
• Choppy/sideways market (no clear direction)
• A news event is pending on the stock (unpredictable)
Strategy 1: Long Call (Simplest):
• Buy an ATM or slightly ITM call
• Hold 2-5 days
• Target: 50-100% premium gain
• SL: 30-40% of premium
Strategy 2: Bull Call Spread (Lower Risk):
• Buy 1 ITM Call + Sell 1 OTM Call
• Net premium cost is lower
• Max profit = spread width - net premium
• Lower risk, lower reward
Strategy 3: Covered Call (Income):
• Hold 100 shares + Sell 1 OTM Call
• Premium income
• If stock above strike → shares sold at strike (still profit)
• If stock below strike → keep premium + keep shares
Keep these five points in mind:
• Buying cheap OTM calls — 70% expire at zero
• Holding into expiry — theta = 100% loss possible
• Trading without an SL — the premium can go to zero
• Buying a call every day — lower frequency, higher quality
• Full capital in one call — max 5-10% of capital per trade
Theoretically unlimited. Practically: 50-200% on the premium in 2-5 days with a good setup.
Bullish traders. FII/DII institutional hedgers. Arbitrage traders.
Max loss = premium paid. Limited. If you paid a ₹4,000 premium = max loss ₹4,000.
theretailtrader.org/index-details/NSEI → Options tab. Nifty/Bank Nifty option chain available.
Call = bullish (price up). Put = bearish (price down). The two are opposites.
Option chain on TRT: theretailtrader.org/index-details/NSEI Learn options: theretailtrader.org/blog Pro (intraday + alerts): ₹2,499/mo — theretailtrader.org/pricing
Educational only. Options involve risk. NOT investment advice.
This article is for educational purposes only — it is not a buy or sell recommendation, it makes no claim of guaranteed returns, and it is not advisory. Rules, rates and mechanics of the exchanges, SEBI and RBI change from time to time, so verify every number yourself with your broker or an official source.