To understand the movement of option price, we need to understand the “Greeks”. Option price movement is affected by its underlying (e.g. stock) price, time decay, volatility, and interest rate.

Delta 
The speed of option price moving relative to the underlying stock position.

Gamma
Measures the speed of Delta moving.  Deep OTM and Deep ITM options have near zero Gamma, and ATM has near one Gamma. Option ATM has the fastest pace of Delta. Near ATM (Delta near 1), the option price is very sensitive to stock price changes.   

Theta
Measures option sensitivity to time decay. Long option has negative Theta, because time decay will decrease option value. Remember option value = intrinsic value + time value. The opposite goes to option writer.   

Vega
Measures option sensitivity to volatility. Long option has positive Theta. Higher volatility will help long position, because option price is also affected by volatility. 

Rho
Measures option sensitivity to interest rate. Positive Rho means that higher interest rate will help position.

Tags: Delta, Gamma, Greeks, Option price, Theta, time decay, Vega

Long call is the basic of option strategy. For beginner, it is the perfect strategy for their first option. A call is an option to buy stock. When buying call option, you are hoping that the underlying will go up. You might know that securities give a target price higher than its current price. In that case, you might want to buy call option. You can sell your stock option when it reaches its target price. Beware of the effects of time decay. Sell your option before the final month before expiration. For example stock ABC is trading at $18.62 on February 20,2008. We want to buy the January 2009 $20.00 strike call for $2.44.
This means that the call premium is $2.44. This is the risk you are taking. You can loss all this money when it reach its expiration date. The reward is unlimited as the stock price rises. You will breakeven at $18.62 + $2.44 = $21.06. The long put is the reverse of long call. Long put is usually cheaper than long call, because stock tends to move higher.
Summary:

Tags: call option, Long call, long put, Option Strategy, time decay