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Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks by W. Edward Olmstead - Professor of Applied Mathematics McCormick School of Engineering and Applied Sciences Northwestern University

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Selecting a Call

When you buy a call option on a stock, you are taking the view that the stock is going to rise in price. You buy a call option instead of buying the stock to give yourself more leverage for a greater profit. If the stock goes up by 15 percent, your option might easily increase in value by 100 percent or even more.

After you have decided what stock you want to play for a gain, you need to select an appropriate call option to buy. This is not as simple as it might seem. You will have many possibilities from which to make a choice. There will be several expiration months to consider, including the current month and other months that possibly go out as far as two years into the future. You will also have various strike prices to ...

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