The simplest of all bullish strategies is the long call.
It is the purchase of call options.
When to use
When we believe that the price of the underline security will rise and the implied volatility is relatively low.
Loss/Profit at expiration
Maximum loss: Limited to the premium we have paid (plus commissions).
Maximum profit: Unlimited as long as the stock price keeps on advancing (minus commissions).
For a long call with strike price $25 and premium $2/share the profit/loss diagram is:
Long call strategy example
Suppose that we have spotted a new uptrend on ETF SPY which is defined by the higher lows 1,3 and the higher highs 2,4 (circled areas below). We can open a long call position at point 5 if the implied volatility is relatively low and if we believe that the price of SPY will keep on advancing. A stop loss can be placed below the lower point of the green circled candlestick in case our expectation is wrong.