Gather ingredients: sugar, water (optional), heavy cream, butter, salt, vanilla (optional)
Choose method: dry caramel (no water) or wet caramel (with water)
For dry caramel: add sugar to a heavy-bottom pot over medium heat
Stir gently only at the start (or swirl the pan) until sugar melts, then stop stirring
Cook until amber and fragrant, shaking the pan as needed
Remove from heat
Carefully add warm or room-temperature cream in a slow stream (mixture will bubble)
Stir until smooth
Add butter and salt; stir until fully incorporated
Add vanilla if desired
Let caramel cool to thicken
For wet caramel: combine sugar and water in a heavy-bottom pot
Heat over medium until sugar dissolves, then stop stirring
Continue cooking until amber
Follow the same steps for removing from heat and adding cream, butter, salt, and vanilla
Store in a jar in the refrigerator and rewarm gently to serve