When I first started trading someone told me that the stock market was like the world’s largest casino.   And let’s be honest, we like the prospect of a good quick return once in a while.  That’s why we trade options. 

Long calls have the potential of delivering dramatic returns within a short period of time.  The advantage of buying long calls is that you can leverage your investment and still get the same upside potential as owning the stock – without the big cash commitment.  In general, you can enjoy the same upside potential from owning one option contract as you can for owning one hundred shares of a stock, at a fraction of the overall dollar commitment.

There are some big differences between owning a stock and buying a call option.  If you own a stock, and the price goes down, you can choose to hold on to it and wait until it goes back up again.  That could take days, weeks, months or years.  With options, you don’t have that luxury.  If the underlying stock price does not exceed the option strike price, at expiration, the loss is the total amount you paid for the
option.  Another important difference: Option owners do not receive stock dividends.