November 11, 2025
7 mins read
When you first start trading options, you should learn about the basic building blocks of the market. You'll frequently encounter two terms: the long call and the short call. They aren't separate, complex instruments but rather two sides of the very same transaction. Think of it as a buyer and a seller. The person taking a 'long call' position is the buyer, while the one taking a 'short call' is the seller. Their strategies, outlook on the market, potential for profit, and exposure to risk are mirror opposites. Grasping this core difference is the first real step towards making sense of how call options function in the market.
A long call is simply the act of buying a call option. As a buyer, you pay a fee, known as a premium, to the seller. This payment gives you the right, but not the obligation, to purchase a specific stock at a pre-agreed price (the strike price) on or before a certain expiry date. You would typically do this if you believe the stock's price is going to rise significantly.
Imagine that you are looking at Company XYZ's stock. You decide to buy a long call option that will last for a month and give you the right to buy 50 shares.
Strike Price: ₹150 for each share
Paid Premium: ₹1,000
You now have the right to buy 50 shares at ₹150 each, no matter how high the market price goes before the option expires. Two scenarios could unfold.
The market is good, and Company XYZ's stock price goes up to ₹220. You decide to exercise your option. You buy the 50 shares at your strike price of ₹150 and can immediately see their market value is ₹220.
Gross Profit: (₹220 - ₹150) x 50 shares = ₹3,500
Net Profit: ₹3,500 (Gross Profit) - ₹1,000 (Premium Paid) = ₹2,500
Sadly, your analysis was wrong, and the price of the stock drops to ₹100. You shouldn't use your right to buy the shares because the price is much lower than your strike price of ₹150. You just let the choice slip away.
Maximum Loss: The ₹1,000 you paid for the premium at the start.
This is the basic idea behind a long call: in theory, you can make an unlimited amount of money, but you can only lose the premium you paid.
A short call is the other side of the transaction; it involves selling (or 'writing') a call option. You, as the seller, get the premium from the buyer. If the buyer chooses to exercise their right, you are obligated to sell them a stock at the strike price. This strategy is usually used when you think the price of a stock will stay the same or go down and not go above the strike price.
Let's say you don't agree with ABC Company. You think the price will stay the same or go down, so you sell a short call option.
Strike Price: ₹1,000
Premium Received: ₹120
You made ₹120 by selling this option. In return, you now have to sell the shares for ₹1,000 if the buyer uses their option.
The market isn't moving, and Company ABC's stock price stays below ₹1,000 until it runs out. The buyer won't use their option because it would be cheaper for them to buy on the open market. The choice is no longer valid.
The profit you could make was ₹120 at the start.
The market goes against what you thought would happen, and the price of the stock goes up to ₹1,050. The person who holds the long call has the right to buy the shares from you at the strike price of ₹1,000. You now have to give those shares. If you don't already own them (a "naked" call), you have to buy them for ₹1,050 on the market and sell them for ₹1,000.
Loss on Shares: ₹1,050 (Market Price) - ₹1,000 (Strike Price) = ₹50
Net Result: ₹120 (Premium Received) - ₹50 (Loss on Shares) = ₹70 (still a small profit)
But if the price had gone up to ₹1,200, you would have lost a lot of cash. This means that the risk in a short call could be unlimited, but the profit is limited to the premium you got.
When discussing the differences between long call vs short call, the market is the main difference. The long call is a bullish strategy that bets on prices going up. The short call is a neutral to bearish strategy that bets prices will stay the same or go down.
Long Call Option | Short Call Option |
Represents a bullish market expectation. | Represents a neutral to bearish market expectation. |
The trader holds the right, not the obligation. | The trader has the obligation if the option is exercised. |
The trader is the buyer. | The trader is the seller (or 'writer'). |
Potential profit is theoretically unlimited. | Potential profit is limited to the premium received. |
Potential risk is limited to the premium paid. | Potential risk is theoretically unlimited. |
Profits when the stock price rises above the strike price. | Profits when the stock price stays below the strike price. |
Let's quickly recap the defining features of long call and short call.
A bullish outlook.
The position of a buyer with rights, not obligations.
An upfront cost (the premium).
Risk that is capped at the cost of the premium.
A profit potential that is, in principle, uncapped.
A neutral or bearish outlook.
The position of a seller with obligations.
An upfront income (the premium).
Risk that can be, in principle, uncapped.
Profit potential that is capped at the premium received.
People are still talking about the role of options trading in the larger financial markets. There isn't one view that everyone agrees on. Some market watchers, like those who write for The Economic Times, say that options, like short calls, make the market more liquid and help people find the right price, which could bring attention to assets that are too expensive.
On the other hand, some people are worried that trading options can make the market more volatile. Long call options can also show that people are optimistic about a company's growth potential, which can affect its overall market value. This is something that Mint and other news outlets often write about.
Additional Read: What are Call and Put Options?
Long Calls: Pros
The potential for profit is theoretically limitless.
The maximum possible loss is known from the start and is limited to the premium paid.
Long Calls: Cons
You lose the whole premium if the stock price doesn't go above the strike price.
Time decay means that the value of the option goes down over time, which is bad for the buyer.
Short Calls: Pros
Gives you money right away from the premiums you collect.
Can profit even if the stock price remains stagnant or falls slightly.
Short Calls: Cons
The potential for loss is theoretically unlimited if the stock price rises sharply.
The maximum profit is strictly capped at the premium received.
Understanding long call vs short call really boils down to understanding their opposing roles and risk profiles. The long call pays a premium for the right to buy, with a defined risk and an undefined potential for gain. The other, the short call, receives a premium for taking on the obligation to sell, with a defined potential gain but an undefined risk. These two perspectives—that of the buyer and that of the seller—are the foundational dynamics that drive the entire call options market.
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A long call is purchased when the trader expects a bullish market, meaning a price increase of stocks. On the other hand, a short call is executed when a bearish market is expected, that is, a decrease in stock price.
When a trader is expecting an increase in the stock price, they go for a long call strategy. Also, since the loss in long call option is limited to the premium paid, it is often opted by traders.
The risks associated with short-call options are unlimited loss. The profit is limited to the premium, however, if the price increases beyond the strike price, the loss may be unlimited.
Profit in a long call option can be unlimited. If the price increases beyond the strike price, it may go quite high, profiting the trader. In a short call, the maximum profit is limited to the premium.
To hedge against the losses, traders may combine long and short-call strategies. However, it is not quite common.
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