CALL OPTION

BUYER______ SELLER______
• HAS THE RIGHT TO BUY A • HAS THE OBLIGATION TO SELL A
STOCK, CURRENCY OR INDEX STOCK, CURRENCY OR INDEX AT
AT THE EXERCISE PRICE THE EXERCISE PRICE
• RECEIVES FROM THE BUYER AN
OPTION PREMIUM
• PAYS THE SELLER AN OPTION
PREMIUM
• BELIEVES THE UNDERLYING
ASSET WILL BE LOWER IN VALUE
• BELIEVES THE UNDERLYING THAN THE BREAKEVEN PRICE
ASSET WILL BE HIGHER IN
VALUE THAN THE BREAKEVEN EXERCISE PRICE +
PRICE OPTION PREMIUM

BREAKEVEN PRICE=
 PUT OPTION
BUYER______ SELLER______
• HAS THE RIGHT TO SELL A • HAS THE OBLIGATION TO BUY A
STOCK, CURRENCY OR INDEX STOCK, CURRENCY OR INDEX AT
AT THE EXERCISE PRICE THE EXERCISE PRICE
• RECEIVES FROM THE BUYER AN
OPTION PREMIUM
• PAYS THE SELLER AN OPTION
PREMIUM
• BELIEVES THE UNDERLYING
ASSET WILL BE HIGHER IN VALUE
• BELIEVES THE UNDERLYING THAN THE BREAKEVEN PRICE
ASSET WILL BE LOWER IN
VALUE THAN THE BREAKEVEN EXERCISE PRICE-
PRICE OPTION PREMIUM

BREAKEVEN PRICE=
 CALL OPTION
BUYER’S SIDE
GAIN

EP BE
CLOSING SPOT RATE
0
LOSS

OUT OF THE MONEY IN THE MONEY

NO EXERCISE EXERCISE POSSIBLE
AT THE MONEY

Breakeven=Exercise Price+Option Price

 CALL OPTION
SELLER’S SIDE
GAIN

EP BE
CLOSING SPOT RATE
0
LOSS

OUT OF THE MONEY IN THE MONEY

NO EXERCISE EXERCISE POSSIBLE
AT THE MONEY

Breakeven=Exercise Price+Option Price

 CALL OPTION
GAIN

EP BE
CLOSING SPOT RATE
0
LOSS

OUT OF THE MONEY IN THE MONEY

NO EXERCISE EXERCISE POSSIBLE
AT THE MONEY

Breakeven=Exercise Price+Option Price

 PUT OPTION
BUYER’S SIDE
GAIN

BE EP
CLOSING SPOT RATE
0
LOSS

IN THE MONEY OUT OF THE MONEY

EXERCISE POSSIBLE NO EXERCISE
AT THE MONEY

Breakeven=Exercise Price-Option Price

 PUT OPTION
SELLER’S SIDE
GAIN

BE EP
CLOSING SPOT RATE
0
LOSS

IN THE MONEY OUT OF THE MONEY

EXERCISE POSSIBLE NO EXERCISE
AT THE MONEY

Breakeven=Exercise Price-Option Price

 PUT OPTION
GAIN

BE EP
CLOSING SPOT RATE
0
LOSS

IN THE MONEY OUT OF THE MONEY

EXERCISE POSSIBLE NO EXERCISE
AT THE MONEY

Breakeven=Exercise Price-Option Price