OPTION PAYOFFS 

BUYERS PAYOFFS - CALL OPTION

Q1. Mr. Suraj purchased call option by paying a
premium of Rs. 3 with an exercise price of Rs. 150
calculate the intrinsic value and profit & loss when
the spot prices are Rs. 146 to Rs. 155

X- Exercise price = 150 X S IVc = S - X Cpr (paid) P/L = IVc + Cpr

S- Spot Price = 146 to 155 150 146 0 -3 -3
150 147 0 -3 -3
Buyer pay off 150 148 0 -3 -3
Ivc = S- X, positive only negative value = 0 150 149 0 -3 -3
150 150 0 -3 -3
150 151 1 -3 -2
150 152 2 -3 -1
150 153 3 -3 0
150 154 4 -3 1
150 155 5 -3 2

2
IVc = S - X
1
P/L = IVc + Cpr
0
1 2 3 4 5 6 7 8 9 10
-1
3

2
IVc = S - X
1
P/L = IVc + Cpr
0
1 2 3 4 5 6 7 8 9 10
-1

-2

-3

-4
 SELLERS /WRITERS PAYOFFS - call option
Yasmin takes a short position on a call option of Sun Tech Ltd. at an exercise
Price Rs. 790 with a premium of Rs. 50. Calculate the profit or loss on the option
Position for Yasmin , if the spot price on expiry is as follows:

Rs. 750, Rs. 760, Rs.770, Rs. 780, Rs.790, Rs. 800, Rs. 810, Rs. 820.
Also draw the Pay – off diagram for the same.

X S IVc = X -S Cpr (received) P/L = IVc + Cpr

790 750 0 50 50
short position - Sales 790 760 0 50 50
790 770 0 50 50
writers pay off 790 780 0 50 50
Ivc = X - S, negative only positive value = 0 790 790 0 50 50
790 800 -10 50 40
790 810 -20 50 30
790 820 -30 50 20

60

50

40

30

20
IVc = X -S
10
P/L = IVc + Cpr
0
1 2 3 4 5 6 7 8
-10

-20

-30

-40
-10

-20

-30

-40
Alia buys a put option on the stock Aman Enterprises. she pays an option
premium of Rs. 20. The exercise price being Rs. 500.
Calculate the profit or loss if the spot price on maturity is any of the following:
Rs. 470, Rs. 480, Rs. 490, Rs. 500, Rs. 510, Rs. 520, Rs.530.
Also draw the Pay – off diagram for the same.

X S IVp= X -S Ppr (paid) P/L = IVp + Ppr

500 470 30 -20 10
500 480 20 -20 0
buyers pay off 500 490 10 -20 -10
Ivp = X - S, positive only negative value = 0 500 500 0 -20 -20
500 510 0 -20 -20
500 520 0 -20 -20
500 530 0 -20 -20

40

30

20
Prfoit & loff & IV values

10
IVp= X -S
P/L = IVp + Ppr
0
1 2 3 4 5 6 7

-10

-20

-30
-10

-20

-30
 Mr. Suraj writes put option by receiving a premium
of Rs. 3 with an exercise price of Rs. 150 calculate
the intrinsic value and profit & loss when the spot
prices are Rs. 146 to Rs. 155

X S IVp = S - X Ppr (received ) P/L = IVp + Ppr

writers pay off 150 146 -4 3 -1
Ivp = S -X, negative values only positive e value = 0 150 147 -3 3 0
150 148 -2 3 1
150 149 -1 3 2
150 150 0 3 3
150 151 0 3 3
150 152 0 3 3
150 153 0 3 3
150 154 0 3 3
150 155 0 3 3

0 IVp = S - X
1 2 3 4 5 6 7 8 9 10
-1 P/L = IVp + Ppr
4

0 IVp = S - X
1 2 3 4 5 6 7 8 9 10
-1 P/L = IVp + Ppr

-2

-3

-4

-5
arjun buys a put option on the stock Aman Enterprises. he pays an option
premium of Rs. 10. The exercise price being Rs. 250.
Calculate the profit or loss if the spot price on maturity is any of the following:
Rs.220, 230,240,250,260,270,280
Also draw the Pay – off diagram for the same.

Premium paid
X S Ivp = X -S (Ppr)
250 220 30 -10
Buyer's Payoff - Put option 250 230 20 -10
Premium paid = 10 250 240 10 -10
X =250 250 250 0 -10
250 260 0 -10
Ivp = X - S, positive only negative value = 0 250 270 0 -10
250 280 0 -10
35
30

25

20
15
Ivp = X -S
10
P/L =Ppr +Ivp
5

0
1 2 3 4 5 6 7
-5

-10
-15
 1 2 3 4 5 6 7
-5

-10
-15
P/L =Ppr +Ivp
20
10
0
-10
-10
-10
-10
 Q1. Mr. sanjay purchased call option by paying a
premium of Rs. 6 with an exercise price of Rs. 300
calculate the intrinsic value and profit & loss when
the spot prices are Rs. 296 to Rs. 305

6
Premium
X S IVc = S - X paid (Cpr)
4 300 296 0 -6
300 297 0 -6
2 300 298 0 -6
P& L , Intrinsic values

Buyers payoff - call option 300 299 0 -6

0 premium paid = 6 , X = 300 300 300 0 -6
1 2 3 4 5 6 7 8 9 10 IVc = S - X 300 301 1 -6
IVc = S - X, positive only negative value = 0 P/L = Cpr + Ivc 300 302 2 -6
-2
300 303 3 -6
300 304 4 -6
-4
300 305 5 -6

-6

-8
P/L = Cpr + Ivc
-6
-6
-6
-6
-6
-5
-4
-3
-2
-1
 Mr. Suraj writes put option by receiving a premium of
Rs. 3 with an exercise price of Rs. 50 calculate the
intrinsic value and profit & loss when the spot prices are
Rs. 46 to Rs. 55

Premium received
X S IVp = S - X (Ppr)
50 46 -4 3
50 47 -3 3
Writer payoff - Put option 50 48 -2 3
50 49 -1 3
IVp = S -X, negative values only positive e value = 0 50 50 0 3
50 51 0 3
50 52 0 3
4
50 53 0 3
3 50 54 0 3
50 55 0 3
2

0
1 2 3 4 5 6 7 8 9 10 IVp = S - X
P/L =Ppr + Ivp
-1

-2

-3

-4

-5
P/L =Ppr + Ivp
-1
0
1
2
3
3
3
3
3
3
Husein takes a short position on a call option of Sun Tech Ltd. at an exercise
Price Rs. 680 with a premium of Rs. 20. Calculate the profit or loss on the option
Position for Yasmin , if the spot price on expiry is as follows:

Rs. 650, Rs. 660, Rs.670, Rs. 680, Rs.690, Rs. 700, Rs. 710, Rs. 720.
Also draw the Pay – off diagram for the same.

Premium
X S IVc = X - S received (Ppr)
680 650 0 20
680 660 0 20
Writers payoff - call option 680 670 0 20
680 680 0 20
680 690 -10 20
IVc = X - S , negative values only positive value = 0 680 700 -20 20
680 710 -30 20
30 680 720 -40 20
20

10
P/L & Intrinsic Value

0
1 2 3 4 5 6 7 8
IVc = X - S
-10
P/L =Cpr + IVc
-20

-30

-40

-50
-40

-50
P/L =Cpr + IVc
20
20
20
20
10
0
-10
-20