Call Option

A Call option is a derivative contract that gives the buyer the right, but not the obligation, to purchase 1 unit of an underlying crypto at a certain price (called the  strike price) on or before the expiration date. If the underlying’s price goes up, the value of the Call option increases. Conversely, if it goes down, the value of the call option decreases.

Long Call

Payoff Diagrams:

Direction Assumption: Bullish

Maximum Profit: Unlimited

Maximum Loss: Limited to Premium paid

Breakeven Price: Strike Price + Premium paid

Theta: Passage of Time -> Negative Effect The time value of the Long Call's premium, which the holder has "purchased" by paying for the option, generally decreases or decays with the passage of time. Theta decrease accelerates as the option contract approaches expiration.

Volatility: If Volatility increases -> Positive Effect. If Volatility decreases -> Negative Effect.

Short Call

Payoff Diagrams:

Direction Assumption: Bearish

Maximum Profit: Limited to Premium paid

Maximum Loss: Unlimited

Breakeven Price: Strike Price + Premium paid

Theta: Passage of Time -> Positive Effect The time value of the Short Call's premium, which the option seller has "collected" by selling the option, generally decreases or decays with the passage of time. Theta decrease accelerates as the option contract approaches expiration.

Volatility: If Volatility increases -> Negative Effect. If Volatility decreases -> Positive Effect.