Step 1

Add the sugar to a heavy bottomed saucepan, then shake it so it lies in an even, flat layer.

Step 2

Add the water to fully moisten the sugar.

Step 3

Place the pot over medium heat and cook until the sugar dissolves and turns clear, a few minutes.

Step 4

Raise the heat to medium high, and cook the caramel until it turns amber colored**, about 10 minutes.

Step 5

Turn the heat off and immediately add the heavy cream. It's okay if the caramel seizes up.

Step 6

Add the butter and stir everything together until the caramel smooths out. If it's still clumpy, turn the heat back on to medium, and gently stir for a few minutes until it's smooth. When finished cooking, add vanilla extract, if desired.

Step 7

Let the caramel sauce cool to room temperature, then transfer to a jar and refrigerate.

Step 8

The caramel can be stored in the refrigerator for 1 month, or in the freezer for 3 months.