{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter 13 - Call Option Payoff Patterns Time 0 Time T...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Call Option Payoff Patterns Time 0 Time T Put Option Payoff Patterns Time 0 Time T Purchase call option, cash flow < 0 Terminal call payoff, Max[S T - X,0] > 0 Cash flows of call buyer Between times 0 and T: Cash flow = 0 for European option Cash flow > 0 for American option Write (I.e., issue) call option, cash flow > 0 Pay terminal call payoff = - Max[S T - X, 0] < 0 Cash flows of call writer Between times 0 and T: Cash flow = 0 for European option Cash flow < 0 for American option Purchase put option, cash flow < 0 Terminal put payoff, Max[X - S T ,0] > 0 Cash flows of put buyer Between times 0 and T: Cash flow = 0 for European option Cash flow > 0 for American option Write (I.e., issue) call option, cash flow > 0 Pay terminal call payoff = - Max[X - S T , 0] < 0 Cash flows of put writer Between times 0 and T: Cash flow = 0 for European option Cash flow < 0 for American option
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Page 238-241 Page 2 Profit Patterns from GP Stock and Options Initial GP stock price 40 Terminal GP stock price 70 Profit from bought stock 30 <-- =B4-B3 Profit from shorted stock -30 <-- =-B4+B3
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}