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2 answers

(1) If I want to take an unhedged bullish position in the underlying and the implied volatility of the option is lower than my expectation of actual volatility of the underlying prior to the expiration of the option.

(2) If I want to open a spread for the underlying and I need the call option as one of the legs of the spread.

2007-03-02 15:14:42 · answer #1 · answered by zman492 7 · 0 0

When you expect the underlying stock or index to rise far enough before the call expires that you would make money. Basically, that would mean that you expect the stock price to be more than the strike price + the premium that you pay for the call + the commissions.

Note that options are risky. If the stock price is below the strike price when the option expires, you lose all the money you paid for the call option.

2007-03-02 14:31:40 · answer #2 · answered by Dave W 6 · 0 0

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