Long Options

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Chapters in this video

  1. 0:00 The movie ticket: prepaid risk with no open-ended exposure
  2. 0:58 Why limited risk does not mean safe
  3. 2:03 Break-even math and the premium hurdle
  4. 3:57 Long call unlimited ceiling vs. long put hard floor at zero
  5. 5:40 Rapid-fire exam recap

What this video covers

  • Why a long option buyer posts no margin or performance bond: the risk is entirely prepaid and closed-ended
  • How the right but not obligation to exercise caps maximum loss at the premium paid, with no further exposure
  • Why "limited risk" means capped in size, not unlikely to lose, and why a 100% premium loss is a routine outcome
  • What out-of-the-money (OTM) expiration means for time value decay, and why options are wasting assets
  • How to calculate break-even for a long call (strike plus premium) and a long put (strike minus premium)
  • Why the maximum profit on a long call is theoretically unlimited due to no ceiling on futures prices
  • Why the maximum profit on a long put is capped at strike minus premium due to the hard floor at zero

Read the full lesson, free

This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete Series 3 course also includes adaptive practice questions and spaced-repetition flashcards, free through the end of 2026.

Read the Free Lesson → free · no signup wall