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Call writer payoff diagram (video) | Khan Academy

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Test prep SAT MCAT GMAT IIT JEE NCLEX-RN CAHSEE. 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. Forward and futures contracts.

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Introduction To Put Writing

Depending on what the stock price is, and expiration would look like this: At "putting" the stock to someone else at fifty dollars. All the way to if the stock becomes worth fifty then my put option, I wouldn't need to excercise it because why would I?

It's worthless to have the option to sell something at fifty where you can just sell the actual stock in the open market or buy the stock at fifty. So then the put option becomes worthless for a stock price above that.

Now, this is the payoff diagram. And this is when we just think about the value and expiration. My payoff diagram would look like this Once again, this payoff diagram just incorporates the price of the option So it's the actual profit.

This is just the value at expiration, depending upon what the value of the stock is at expiration. Now this is just a situation if you were to buy an option but there has to be someone on the other side of the contract someone who's holding, agreeing to buy the option for you So you could actually have the writer, you could actually have the writer, of the put the payoff diagram we just showed is the person who owns the put, but someone else had to have created the put.

They said, "Oh, you know what, I will give you the right.