Call/Put

Equations and Graphs

What do you think will happen if you are buying a call?

You think the stock price will rise.

What do you think will happen when you are writing a call?

You think the stock will stay low.

What do you think will happen if you are buying a put?

You think the stock will fall.

What do you think will happen if you are writing a put?

You think the stock will stay high.

What is the equation for net profit when buying a call?

Net Profit = PU - PS - C

What is the equation for net profit when you are writing a call?

Net profit = C - (PU - PS)

What is the equation for net profit when you are buying a put?

Net profit = PS - PU - P

What is the equation for net profit when you are writing a put?

Net profit = P - (PS - PU)

Is buying a call bullish, bearish or neutral?

Bullish

Is writing a call bullish, bearish or neutral?

Bearish or neutral.

Is buying a put bullish, bearish or neutral?

Bearish.

Is writing a put bullish, bearish or neutral?

Bullish or neutral.

What happens to the premium when you are buying a call?

You pay for the premium.

What happens to the premium when you are writing a call?

You receive the premium from the buyer.

What happens to the premium when you are buying a put?

You pay the premium.

What happens to the premium when you are writing a put?

You receive the premium.

What does the graph look like for buying a call?

What does the graph look like when you are writing a call?

What does the graph look like when you are buying a put?

What does the graph look like when you are writing a put?