Call put option payoff diagram

Call put option payoff diagram

Posted: BotaniQ Date: 28.06.2017

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Finance and capital markets Options, swaps, futures, MBSs, CDOs, and other derivatives. Call option as leverage. Put writer payoff diagrams.

Call writer payoff diagram. Put-call parity arbitrage I. Put-call parity arbitrage II. Option expiration and price.

Options Pricing: Profit And Loss Diagrams

Forward and futures contracts. Google Classroom Facebook Twitter Email. Payoff diagrams are a way of depicting what an option or set of options or options combined with other securities are worth at option expiration. What you do is you plot it based on the value of the underlying stock price. And I have two different plots here, one that you might see more in an academic setting or a textbook, and one that you might see more if you look up payoff diagrams on the internet, or people actually trading options.

But they're very similar. This one just worries about the actual value of the options at expiration. This worries about the profit and loss. So this will incorporate what you paid for the option, this will not.

call put option payoff diagram

This just says what it is worth. If it was a European option, it would be on expiration. So what is the value of this option at expiration?

So this is value at expiration.

Put Option Payoff Diagram and Formula - Macroption

So the option would be worthless. It would be worthless.

call put option payoff diagram

They would just let it expire. No reason to actually exercise the option. And so you have a payoff diagram that looks something like this. It kind of hockey sticks.

Option Payoff and Profit cozosen.web.fc2.com4

Now, if you do it in the profit and loss model, all you have to do is incorporate what you actually paid for the option. You have lost the price of the option because you wouldn't exercise it.

So there you are break even. So these are both legitimate payoff diagrams for a call option, for this call option right over here. They're just different ways of viewing it. This is the value of the option. This incorporates the actual cost of it.

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