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Describe the profit and loss of the buyer of a call option and a writer of...

Describe the profit and loss of the buyer of a call option and a writer of a put option

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Call Buyer- Call Buyer has no obligation to perform. it is required to pay premium for purchasing the right. call Buyer is buyer of right of share. A call option is an agreement between a buyer and seller where the purchase of commodity at specified price with in a specified time period.

Call Buyer is excersice when spot price on expiry is greater than excersice price.

Gross Profit of call buyer = Spot Price on Expiry - Excersice Price

Net Profit for the call Buyer = Spot Price on Expiry - Excersice Price - Option Premium

Put Option Writer - A writer of the put option has promised to buy the underlying investment from the put buyer, who has purchase the right to sell the investment at a specifies price.

Put Buyer will excersice whenever stock price as on expiry is less than Excersice Price.

Gross Profit of call buyer = Excersice Price - Spot Price on Expiry

Net Profit for the call Buyer = Excersice Price - Spot Price on Expiry - Option Premium

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