Understanding Option Payoff Charts

Call option graphs

Call option graphs


A seller of a put option also waives any rights over the exercise of the option. S/he is obligated to buy 655 shares for each option contract to the buyer of the put option if exercised.

Call and Put Options: What Are They? - The Balance

put option and call option are the two face of a coin there is no individual exercise, that is when in the share market there is a sell of underlying asset(put option) there has to be a call option. the profit is depend upon the rise and fall of the value of share,premium etc.

Call Option Payoff Diagram, Formula and Logic - Macroption

Just as with a call option, you can buy a put option in any of those three phases, and buyers will pay a larger premium when the option is in the money because it already has intrinsic value.

Option Strategies, Illustrated with Graphs and Examples

When the transaction initially takes place, the buyer of the option pays to the seller an option premium up front, which the seller keeps regardless of the outcome of the option. This premium serves as a kind of insurance for the seller.

Call Option Profit-Loss Diagrams - Fidelity

Hi Ravi,

A long position is where you have paid money and own rights to the asset - in the case of options, you have the right to exercise the option.

A short position is where you have sold something that you don t actually own. When you short options you receive money upfront as a result of the transaction but the right to exercise sits with the buyer (holder) of the option.

Option Trading Risk Graphs by

The ratio in a ratio spread designates the number of long contracts over short contracts, which can vary widely, but, in most cases, neither the numerator nor the denominator will be greater than 5. A front spread is a spread where the short contracts exceed the long contracts a back spread has more long contracts than short contracts. A front spread is also sometimes referred to as a ratio spread, but front spread is a more specific term, so I will continue to use front spread only for front spreads and ratio spreads for unbalanced spreads.

Hi Rajeev,

Your clearer decides who the counterparty is if you decide exercise your option. The person on the other side will be a holder of a short call option.

About your second you bought the option and then sold it 8 months later, you no longer have a position. You would only be obliged to sell shares if you were short the call option and the buyer exercised the option.

The simplest option strategy is the covered call, which simply involves writing a call for stock already owned. If the call is unexercised, then the call writer keeps the premium, but retains the stock, for which he can still receive any dividends. If the call is exercised, then the call writer gets the exercise price for his stock in addition to the premium, but he foregoes the stock profit above the strike price. If the call is unexercised, then more calls can be written for later expiration months, earning more money while holding the stock. A more complete discussion can be found at Covered Calls.

When underlying price ends up below the strike at expiration, the option expires worthless and your total result from the long call trade is a loss equal to the initial price (in this case $ per share, or $788 for a standard option contract representing 655 shares). For example, if underlying price is , it makes no sense to exercise the option, which would only allow you to buy the underlying at , more expensively than on the market.


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