Options contracts offer buyers a chance to gain significant exposure to a stock at a relatively low price. Used in isolation, they can generate significant gains when a stock goes up. But they can also result in a 100 percent loss of premium if the call option expires worthless because the underlying stock price does not exceed the strike price. The advantage of buying call options is that the risk is always limited to the premium paid for the option. Investors can also buy and sell different call options at the same time, creating a call spread. These limit both the potential gain and loss from the strategy, but in some cases are less expensive than a single call option because the premium from writing one option offsets the premium paid for the other.
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