He clicked "Sell to Close," watching his initial turn into $4,000 . He hadn't needed $15,000 to participate in the gain; he just needed a well-timed contract and a bit of leverage .
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Leo sat in his home office, staring at the ticker for . The stock was trading at $150 , but with a major product launch scheduled for next month, Leo was convinced it would skyrocket. He didn't want to buy 100 shares outright—that would cost him $15,000. Instead, he decided to buy a call option . He clicked "Sell to Close," watching his initial
"There," Leo thought. "I’ve bought the , but not the obligation , to buy those shares at $160, no matter how high the price goes." For financial advice, consult a professional
Leo’s option was now "in the money." Because he held the $160 strike call, he could technically buy the shares for $160 and immediately sell them for $200, netting a massive profit. Alternatively, he could simply sell the option itself, which had climbed in value from $5 to over $40.
Three weeks later, the product launch was a sensation. Nebula Tech’s stock surged to .
He opened his brokerage app and selected the call with an expiration date two months away. The premium was $5 per share. Since one option contract represents 100 shares , he paid $500.