Options

To understand Options better

Use the following criteria to make easier the process of graph an option

First

The CALL Options ALWAYS increase when the price of the inderlying asset increases!

The Long Call Options increase their benefits when price increases

The Short Calls increase their losses when the prices increases

Second

The PUT options always decrease when the price increases

The Short PUT options reach a limit when the price increases, (they get as a profit the premium)

The LONG PUT reach the limit in losses when price increases (the losses are the premium they paid#)
Long 50 Call
Premium 2

Graph P/L (profit and loss)

Stock price
at Expiration Profit/Losses
57
56
55
54
53
52
51
50
49
48
47
LONG CALL The CALL Options ALWAYS increase when the price of the inderlying asset increases!

The Long Call Options increase their benefits when price increases
Short 50 Call Graph P/L (profit and loss)
Premium 3

Stock price
at Expiration Profit/Losses

58
57
56
55
54
53
52
51
50
49
48
47
The CALL Options ALWAYS increase when the price of the Underlying asset increases!

The Short Calls increase their losses when the prices increases
Long PUT 50 Graph P/L (profit and loss)
Premium 2

Stock price
at Expiration Profit/Losses

58
57
56
55
54
53
52
51
50
49
48
47
The PUT options always decrease when the price increases

The LONG PUT reach the limit in losses when price increases (the losses are the premium they paid#)
Short PUT 50 Graph P/L (profit and loss)
Premium 2

Stock price
at Expiration Profit/Losses

58
57
56
55
54
53
52
51
50
49
48
47
The PUT options always decrease when the price increases

The Short PUT options reach a limit when the price increases, (they get as a profit the premium)
 Long 50 Call
Premium 2

Graph P/L (profit and loss)

Excercise price 50
Premium 2
Stock price
at Expiration Profit/Losses Subtract From the Stock pr
57 5 5
56 4 4
55 3 3 Max ( Purchase price + Opti
54 2 2
53 1 1
52 0 0
51 -1 -1
50 -2 -2
49 -3 -2 You don´t exercise the opti
48 -4 -2
47 -5 -2

Stock price
at Expiration Profit/Loss Profit/Losses
57 5 5
56 4 4
6
55 3 3
5
54 2 2
53 1 1 4
52 0 0 3
51 -1 -1 2
50 -2 -2
1
49 -3 -2
48 -4 -2 0
46 48
47 -5 -2 -1

-2

-3
 LONG CALL The CALL Options ALWAYS increase when the price of the underlying asset increases!

The Long Call Options increase their benefits when price increases

Subtract From the Stock price at expiration the exercise price (50 in this case), together with the option premium

Max ( Purchase price + Option premium - Stock price), or option premium

You don´t exercise the option so you only lost the premium

Option
6

5
Long Call
4
6
3
5
2
4
1
3
0
2 46 48 50 52 54
-1
1
-2
0
46 48 50 52 54 56 -3 58
-1

-2

-3
g asset increases!

Option

52 54 56 58
 Short 50 Call Graph P/L (profit and loss)
Premium 3

Excercise price 50
Premium 3
(Exercise price + premium) - s
Stock price
at Expiration Profit/Losses

58 -5 -5 4
57 -4 -4 3
56 -3 -3 2
55 -2 -2 1
54 -1 -1 0
53 0 0 46 48 50
-1
52 1 1
-2
51 2 2
-3
50 3 3
49 4 3 -4

48 5 3 -5
47 6 3 -6
 The CALL Options ALWAYS increase when the price of the underlying asset increases!

The Short Calls increase their losses when the prices increases

(Exercise price + premium) - stock price at expiration

Short
4
3
2
1
0
46 48 50 52 54 56 58 60
-1
-2
-3
-4
-5
-6
 Long PUT 50 Graph P/L (profit and loss)
Premium 2

Excercise price 50 (Exercise price+premium)-Stock price

Premium 2

Stock price
at Expiration Profit/Losses 4.5
4
58 -6 2
3.5
57 -5 2
56 -4 2 3
55 -3 2 2.5
54 -2 2 2
53 -1 2 1.5
52 0 2
1
51 1 2
0.5
50 2 2
49 3 3 0
46 48 50
48 4 4
 The PUT options always decrease when the price increases

The LONG PUT reach the limit in losses when price increases (the losses are the premium they paid#)

rice+premium)-Stock price at expiration

Long Put

48 50 52 54 56 58 60
 Short PUT 50 Graph P/L (profit and loss)
Premium 2
(Stock price at expiration -(
Excercise price 50
Premium 2

Stock price
at Expiration Profit/Losses
3
58 6 2 2
57 5 2 1
56 4 2
0
55 3 2 46 48 50
54 2 2 -1
53 1 1 -2
52 0 0 -3
51 -1 -1
-4
50 -2 -2
49 -3 -3 -5

48 -4 -4 -6
47 -5 -5
 The PUT options always decrease when the price increases

The Short PUT options reach a limit when the price increases, (they get as a profit the premium)

(Stock price at expiration -(Exercise price+Premium)

Short Put

6 48 50 52 54 56 58 60
ofit the premium)