[일 배우기 ] Introduction to Option (2)

Topic 2: Option generating profit

Option Payoffs/Profitability

Payoff = 옵션 팔아서 받는 돈

Profitability = Payoff - option premium(살때 지불한 값)

*breakeven= payoff (spot price-strike price) = option premium

Action	Payoff	Profitability
not exercise	0	- option premium
Exercise	strike price	strike price - option premium

 

1) Long Call : call option holder. when the price goes up, profit +

2) Short Call : call option seller. when the price goes up, profit -

3) Long Put : put option holder, when the price goes down, profit +

4) Short Put :  put seller. when the price goes down, profit -

 

@Option uses

옵션은 "변동성"을 헷지한다.

1. Protective put: downward risk hedging
Maximum loss= option premium (when do not exercise)

2. Covered call
Possible profit is limited but can prevent larger loss than a certain amount.

3. Covered put
To protect from increasing prices.

4. Straddle
One call and one put with the same strike price and expiration date.
If the price is less than strike price, exercise put and do not exercise call.
If the price is more than the strike price, exercise call but do not exercise put.
Considering option premium initially paid, not always the profit is positive. The price of straddle option indicates the volatility of the market.