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Discuss the various payoff systems.

Discuss the various payoff systems.

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Answer #1
Product Position Translation Downside
Call Long Bought – Owns the option Premium paid
Call Short Sold – Wrote the option If the option is exercised, the difference between Market price and Strike price
Put Long Bought – Owns the option Premium paid
Put Short Sold – Wrote the option If the option is exercised, the difference between Strike price and Market price
Forward Long Bought the underlying The difference between Forward price and Market price, if prices decline
Forward Short Sold the underlying The difference between Market price and forward price, if prices rise
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