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training_data/curated/text/cf611cbdd6128eb8e9725ae5d314f3ce894ab126c45e8305ead6b3e037610b56.txt

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+OPTION TrAdINg STrATegIeS
+Strategy 3b: Long Call (Out-of-the-Money)
+exAMPle. Buy August $1,300 gold futures call at a premium of $9.10/oz ($910), with August gold 
+futures trading at $1,200/oz. (See Table 35.3b and Figure 35.3b.)
+Comment. The buyer of an out-of-the-money call reduces his maximum risk in exchange for accept-
+ing a smaller probability that the trade will realize a profit. By definition, the strike price of an out-of-
+the-money call is above the current level of futures. In order for the out-of-the-money call position 
+to realize a profit, the futures price (as of the time of the option expiration) must exceed the strike 
+price by an amount greater than the premium ($9.10/oz in this example). Note that in the out-of-
+the-money call position, price increases that leave futures below the option strike price will still result 
+in a maximum loss on the option. The long out-of-the-money call might be a particularly appropriate 
+position for the trader expecting a large price advance, but also concerned about the possibility of a 
+large price decline.
+It should be emphasized that the futures price need not necessarily reach the strike price in order 
+for the out-of-the-money call to be profitable. If the market rises quickly, the call will increase in 
+value and hence can be resold at a profit. (However, this characteristic will not necessarily hold true 
+for slow price advances, since the depressant effect of the passage of time on the option premium 
+could more than offset the supportive effect of the increased price level of futures.)
+For small price changes, the out-of-the-money call will change by less than a factor of one-half for 
+each dollar change in the futures price. Thus, for small price changes, each long futures position will 
+be equivalent to several long out-of-the-money calls in terms of risk.
+tabLe 35.3b profit/Loss Calculations: Long Call (Out-of-the-Money)
+(1) (2) (3) (4) (5)
+Futures price at 
+expiration ($/oz)
+premium of august 
+$1,300 Call at 
+Initiation ($/oz)
+$ amount of 
+premium paid
+Call Value at 
+expiration
+profit/Loss on 
+position [(4) – (3)]
+1,000 9.1 $910 $0 –$910
+1,050 9.1 $910 $0 –$910
+1,100 9.1 $910 $0 –$910
+1,150 9.1 $910 $0 –$910
+1,200 9.1 $910 $0 –$910
+1,250 9.1 $910 $0 –$910
+1,300 9.1 $910 $0 –$910
+1,350 9.1 $910 $5,000 $4,090
+1,400 9.1 $910 $10,000 $9,090