Buying a call option

The trade

It's Tuesday. NIFTY is at 22,400 and you think it will rise over the coming week. You buy one lot of the NIFTY 22400 CE expiring next Tuesday at ₹175.

What is it worth on expiry day?

On expiry, a call is worth exactly how far NIFTY finishes above the strike — and nothing if it finishes below:

Call value at expiry = max(0, NIFTY − strike)

That's its intrinsic value. Your profit is that value minus the ₹175 you paid. Let's walk through some endings:

Notice three things:

1. Below 22,400 the loss never gets bigger. Whether NIFTY falls 100 points or 1,000, you lose ₹11,375 and not a rupee more.
2. Between 22,400 and 22,575 you lose less and less. The option has some value, just not enough to pay back the premium.
3. Above 22,575 every point is profit — ₹65 per point for one lot.

See it as a picture

Here's the same table as a graph. Drag the slider to choose where NIFTY ends on expiry:

Drag: where does NIFTY close on expiry day?22,400

If NIFTY ends at 22,400, you lose ₹11,375.

This "hockey stick" shape is the signature of a bought call: a flat floor (your maximum loss) and a ramp that keeps climbing. The yellow line marks the breakeven.

You don't have to wait for expiry

The table above is about expiry day. In real life most traders exit earlier by simply selling the option back in the market.

1. 1

   Tuesday: you buy at ₹175

   NIFTY 22,400. Your ₹11,375 is debited.

2. 2

   Thursday: NIFTY jumps to 22,600

   The call now trades around ₹270 — it has 200 points of intrinsic value plus some time value left.

3. 3

   You sell at ₹270

   Profit = (270 − 175) × 65 = ₹6,175, booked two days into the trade.

Before expiry, the price of the call depends not just on NIFTY but also on time left and volatility. That's Module 2. For now, the key idea: a call's price rises when the underlying rises.

When does buying a call make sense?

Try it yourself: open the Strategy Builder, tap B on any call, and the payoff graph draws itself.