What Is the Maximum Loss on a Long Call Option?
The maximum loss on a long call option is limited to the premium paid to purchase the option. If the underlying asset price drops or stays below the strike price, the option will expire worthless, and the trader will lose the entire premium.
Unlike short positions, the risk is finite and known upfront.
Glossar
Underlying Asset Price
Valuation ⎊ The underlying asset price in cryptocurrency derivatives represents the current market consensus of an asset’s worth, serving as the foundational input for pricing options and futures contracts.
Long Call Option
Derivative ⎊ A long call option, within the cryptocurrency context, represents a financial derivative granting the holder the right, but not the obligation, to purchase an underlying digital asset at a predetermined price (the strike price) on or before a specific date (the expiration date).
Maximum Loss
Value ⎊ Maximum Loss represents the absolute worst-case financial outcome, expressed as a specific monetary value, that a derivatives position can incur over its entire life cycle.
Long Call
Position ⎊ A Long Call represents the outright purchase of a call option, granting the holder the right to buy the underlying crypto asset at a specified strike price before expiration.