Long Call
A long call is one purchased option: the right, not the duty, to buy the shares at the strike price until expiry. The buyer pays the premium once and can lose no more than that premium and the commission. In exchange the buyer gives up the dividends a shareholder would receive, and pays for time value that runs off whether or not the share rises. Above the strike plus the premium the gain has no cap. It is built for a rise expected within a known period, using a small, fixed sum instead of the full price of the shares. On this page one BP December call costs £493.90; the 1,000 shares it gives rights over would cost £5,326.50.
The page assumes the reader has met the option chain and the split of a premium into intrinsic and time value on the basics page. BP is used as a model underlying; this is not a view on BP.
Which strike: four BP December calls on one chain
The first decision on a long call is not whether BP rises but how far in or out of the money to buy. The table prices four December strikes on the same chain. The pound results at the right assume the call is sold at its intrinsic value on expiry day, with commission both ways; a call that expires worthless pays only the opening commission.
Probabilities are model probabilities (risk-neutral, lognormal, IV 26%, dividend deducted from the share price), not forecasts. The model probability that each call finishes in the money at all is 80.7%, 62.3%, 42.3% and 25.2% from the lowest strike to the highest.
Three things come out of the menu, and each has a price.
The worked example uses the 500 call: 30p in the money, a delta of 702 shares, and 39% of the premium in time value. It keeps a meaningful share of BP's move while holding the maximum loss to £493.90.
Which expiry: the 500 strike to October, November, December or March
ICE lists UK stock options on monthly expiries, the third Friday of the month; there are no weekly ICE UK stock options, although US chains have them. The same 500 strike therefore comes in a handful of dates. A longer option costs more in total and less per day, and it carries more of BP's calendar with it.
The October call is the only one with nothing on BP's calendar inside it, and it is £72.50 cheaper than December. It also has 63 fewer days in which BP has to rise, and its time value costs more per day: £2.00 against £1.57. The same call is priced on the tax page's Example 6 at the same 42.00p, where it is held to expiry. The March call has the lowest daily cost, £1.29, but two ex-dividend dates to pass. The worked example takes December: four months for a rise to show, with its two events priced in the section on results and the ex-date below.
The worked example: one December 500 call bought on Monday 17 August 2026
The fill is the model value, 49.35p, rounded to the nearest 0.25p tick, so the call is bought £1.04 a contract below its model value. A real order would also pay part of the quoted spread. The costs are set out in pounds here, following the library's cost conventions:
The spread rows add half the quoted width to each trade, the library's convention; the widths are illustrations, not ICE quotes, and the breakevens in those rows include the tiered commission. SDRT of 0.5% falls on the strike consideration only when an exercise delivers UK shares, and the buyer of the shares pays it (HMRC STSM113030); rights under an option over UK shares are within SDRT in principle (STSM113020), but we could not confirm any charge on ordinary ICE option trades (checked 26 September 2026). The assignment page sets out who pays on each side.
Contract and access. BP options trade on ICE Futures Europe as standard contracts of 1,000 shares, quoted in pence with a 0.25p tick (£2.50 a contract), American exercise by 18:30 on any business day and delivery two business days after exercise. BP is not one of the 22 UK names with a 100-share mini option (contract sizes). IBKR UK and Saxo UK both publish ICE option commissions (broker comparison). At IBKR a long call sits in Options Level 2, and a cash account can hold it because the premium is paid in full (accounts and permissions); brokers apply the FCA's appropriateness test before granting it.
Open this worked example in the strategy builder (the builder solves the volatility from the 49.25p fill and prices on its own closed-form model, so its curves differ slightly from the tree values here).
The payoff on 17 August, on 16 October and at expiry
The solid line is the familiar hockey stick: a flat loss of £492.50 up to the strike, then £10 a contract for every penny above it. The two curves show what the call would be worth before expiry at the same share prices, with volatility unchanged. The vertical gap between a curve and the solid line is the time value still in the option on that date. On 16 October, with BP unchanged at 530p, the model values the call at 38.98p, £104.10 less than the £493.90 paid, even though BP has not moved; that is the running cost of holding the right.
The share column includes the £26.50 of SDRT on the purchase and the £63.90 dividend (6.39p ex 12 November, paid 18 December), before dealing commission. A call worth something on expiry day is assumed sold at intrinsic value; one worth nothing lapses and pays only the opening commission.
BP's 30 October results and 12 November ex-date, inside the call's life
Every December BP option bought in August carries two dated events: third-quarter results on Friday 30 October and the ex-dividend date on Thursday 12 November (bp financial calendar 2026). Each is a number in the call's price, and each can be priced.
The dividend makes the call cheaper, and gives it an early-exercise right. A call holder receives no dividend, and BP's shares open about one dividend lower on the ex-date, so the December 500 call is worth 49.35p with the 6.39p dividend in the model and 52.26p without it: £29.05 a contract less, close to half the £63.90 the shareholder is paid, because the call's delta is below one. Of the 49.35p, 1.49p is the value of being able to exercise before the ex-date; a European call on the same terms is worth 47.87p (American against European value).
The results date can add a premium, and take it away again. If the market priced a 5.55% results-day move into BP options, the illustration used on the implied volatility page, the December volatility would rise from 26% to 27.56%: the square root of the whole of [0.26² × (123/365 − 1/252) + 0.0555²] ÷ (123/365). The call would then cost 50.98p, £16.25 more. Once the results are out, that premium tends to leave the price. The table prices the call on Monday 2 November, the first trading day after the results, with 46 days left, at the model's 26% and at 20%:
A fall in volatility costs most when the call is near the money. With BP unchanged the six-point fall changes the call's value by −£28.75 a contract; at 590p, where the call is almost all intrinsic value, by only −£0.37. The results page works through the event premium from both the buyer's and the writer's side.
The evening before the ex-date: exercise or hold? A holder who exercises by 18:30 on Wednesday 11 November buys the shares at 500p in time to receive the dividend; one who does not keeps a call on a share that opens about 6.39p lower. The table compares the two for the December call, with 37 days to run, at several share prices:
For a holder with the options-intermediary SDRT relief, exercising is worth it from about 542p; for a retail holder, who also pays 0.5% of the £5,000 strike, only from about 561p. Exercising also means finding £5,026.40 that evening and giving up the call's floor. The assignment page works the same test for November calls with nine days left and shows the writer's side.
Five endings, and what the worked plan's conventions did first
The worked plan sets three conventions on the day it buys: a resting order to sell at 74.00p, the first tick at or above a 50% gain on the 49.25p premium (73.875p); a stop that sells if the call falls to half its premium, 24.625p; and a time stop that closes the call on Friday 27 November, with 21 days left. Where they come from, and what the evidence says about them, is on the methods page under teaching conventions. Branches A, C, D and E follow a straight-line path in BP's price with volatility unchanged, an assumption made to date the conventions, not a forecast.
Each convention swaps one outcome for another, and the table puts pounds on the swap. The sell order in Branch A banked £244.70 and gave up the last £180.00 of the rise to 590p; had BP turned back after 25 September, the same order would have been the only profit taken. The stop in Branch C held the loss to £252.80 rather than £493.90, and cost £357.50 of recovery if BP came back to 560p. The time stop in Branch B saved £27.50 if BP stayed at 540p and gave up £372.50 if it reached 580p.
A holder who had set none of the conventions and was still in the call on the evening of 11 November, with BP above about 561p, would have faced the ex-date choice in the table above. At expiry an in-the-money call is normally exercised automatically: ICE Clear Europe's procedures give one tick in the money as the setting for several contracts but do not state it for UK equity options, so the broker's own rule applies, and a broker may close or lapse the call first if the account cannot pay for 1,000 shares (expiry and automatic exercise). Selling the December call and buying a later one is a roll: two trades and, for tax, a sale followed by a new purchase (roll mechanics).
The call's Greeks from entry to the last three weeks
Greeks come from the same binomial tree as the values, by small changes to each input. One standard deviation is the lognormal range 530p × e±0.26√(123/365). The mark-to-model row is before the closing commission.
Delta starts at 702 share-equivalents, so a 1p move in BP changes the position by about £7.02. Theta is the cost of the clock: £1.67 a day at entry, £2.33 a day with three weeks left and BP unchanged, when the call has become a narrower bet on where BP closes on one Friday. Vega falls from £10.33 to £3.08 a point over the same period, which is why the results-date volatility matters in August and hardly at all by late November.
Rho, at £8.71 per percentage point, is almost as large as vega per volatility point. It is small in practice only because Bank Rate moves in quarter points: a 0.25-point cut at the Monetary Policy Committee's 5 November decision would take about £2.18 off the call. Position Greeks and their units are explained on the Greeks page.
£493.90 or £5,326.50: the call against 1,000 BP shares
A long call is often described as a substitute for owning the shares. The comparison only means something once the cash the call does not use, and the dividend it does not receive, are put in with their tax. The table assumes the unused cash earns Bank Rate for the 123 days, as simple interest, as a stand-in for a savings rate.
Above 500p on 18 December the shareholder finishes a fixed £171.63 ahead of the call holder before tax: the £192.50 of time value, the £63.90 dividend and £2.80 of option commission, less the £26.50 of SDRT the call holder did not pay and the £61.07 of interest. For a higher-rate taxpayer whose allowances are already used the gap is £173.21, because the dividend and the interest are taxed at nearly the same rate. Below 500p the call's loss stops at £493.90, or £432.83 after the £61.07 of interest; at 420p the shareholder is £1,062.60 down, £629.77 worse off than the call holder on the same basis (£568.70 before interest). The call is, in effect, the shares plus a floor at the strike, paid for with about £171.63 over four months.
UK tax: a sale, a lapse and an exercise in 2026/27
Buying the call is not a disposal. What follows it decides the tax. The figures assume the £3,000 annual exempt amount is used by other gains and show CGT at 18% (within the basic rate band) and 24% (above it) for 2026/27.
The trap on this page: buying the same call back. Options of the same series are pooled, so the same-day and 30-day matching rules apply to them (CG55535). In Branch C the stop sells the call on 7 October for a £252.80 loss. Buying the same December 500 series again on Monday 19 October 2026 at 22.00p (model 22.11p, BP 505p) matches the sale with that purchase: £241.10 of proceeds against £221.40 of cost, a gain of £19.70 instead of the loss, with the original £493.90 carried into the cost of the re-bought call. A different strike or expiry is a different series. The rules are worked on the tax page (bought options, 30-day matching). No option can be held in any ISA, so the call sits in a general account (wrappers).
The same trade on a US chain, counted in pounds
US equity options are 100-share contracts, American, with delivery one business day after exercise. For a like-for-like example, take a $100 US share that pays no dividend, and a December 18, 2026 $95 call bought on 17 August: IV 30%, a US rate of 3.625% (the model's midpoint of the Federal Reserve's target range), $0.05 ticks (a penny-programme class above $3), and IBKR's $0.65 a contract, which the $1.00 minimum per order lifts to $1.00 for one contract, before exchange fees.
Converting the $598.00 gain at the purchase-date rate would give £441.04, which is not how HMRC computes it: cost and proceeds are each converted on their own dates (CG78310; two dates, two rates). Sterling's rise from $1.3559 to $1.40 cost this trade £37.73, before any conversion spread. The $1.3559 is the ECB reference-rate cross for 17 August; the $1.40 is an illustration. There is no UK SDRT on US shares; exercising would cost $9,500.00 for 100 shares. The US does not withhold tax on option gains for a UK resident; the W-8BEN matters for US dividends (W-8BEN and withholding). US options trade from 14:30 to 21:00 UK time, and from 13:30 to 20:00 during the clock-change week of 26 to 30 October (US hours in UK time).
Firms offering US options to UK residents, as the firms describe themselves (checked 26 September 2026): Interactive Brokers (U.K.) Limited, FCA reference 208159; IG's US options and futures account, where tastytrade executes and Apex Clearing holds the positions outside the FSCS; Robinhood U.K. Ltd, FCA reference 823590, at $0.50 a contract plus $0.04 of fees, with orders executed and held by Robinhood Securities, LLC in the US; and Webull Securities (UK) Ltd, which gives FCA reference 961286, acts as agent and opens the account with Webull Securities (Australia), at $0.50 a contract plus fees. tastytrade, Inc. is a US broker-dealer, not FCA-authorised. The FCA register (register.fca.org.uk) is where a firm's status can be confirmed; the US options page covers the route in full.
What the worked plan checked before buying, and why
The worked plan looked at six things before the purchase. None is a rule; each is a question with a price, and the table gives the price on this chain.
Other ways to take the same view, priced on the same chain
For a bullish view taken with a credit on a different share, the bull put spread works through HSBC. A falling-market view mirrors this page on the long put.