Upnotes

Payoff and Profit at Expiry

Option Profit and Loss Diagram

X-axis: Underlying Price at Expiration ( $S_{T}$ )

Y-axis: Profit at Expiration

Strike Price

$K = 10$

Premium

$c_{0} = 1$

Breakeven

S_{T} = K + c_{0}

= 11

Underlying Price at Expiration

$S_{T} = 10$

Payoff at Expiration

max (0, S_{T} - K)

= 0.00

Profit at Expiration

Π = max (0, S_{T} - K) - c_{0}

= - 1.00

Formulas

Payoff at Expiration

Long Positions

Call Payoff

max (0, S_{T} - K)

Put Payoff

max (0, K - S_{T})

Short Positions

Call Payoff

- max (0, S_{T} - K)

Put Payoff

- max (0, K - S_{T})

Profit at Expiration

Long Positions

Call Profit

max (0, S_{T} - K) - c_{0}

Put Profit

max (0, K - S_{T}) - p_{0}

Short Positions

Call Profit

- max (0, S_{T} - K) + c_{0}

Put Profit

- max (0, K - S_{T}) + p_{0}

Maximum Profit and Loss

Long Positions

Call Max Profit

Unlimited (theoretical)

Call Max Loss

Premium paid (c₀)

Put Max Profit

Unlimited (theoretical)

Put Max Loss

Premium paid (p₀)

Short Positions

Call Max Profit

Premium received (c₀)

Call Max Loss

Unlimited (theoretical)

Put Max Profit

Strike price minus premium (K - p₀)

Put Max Loss

Premium received (p₀)

Breakeven Points

Long Positions

Call Breakeven

S_{T} = K + c_{0}

Put Breakeven

S_{T} = K - p_{0}

Short Positions

Call Breakeven

S_{T} = K + c_{0}

Put Breakeven

S_{T} = K - p_{0}

Upnotes

Options

Fundamentals

Payoff at Expiration

Profit at Expiration

Maximum Profit and Loss

Breakeven Points