Calculate Option Profit And Loss - Series 7

1. What is the total dollar P/L for $1$ listed option contract given per-share P/L?

   $\text{Total P/L} = (\text{per-share P/L})\times 100$. Each option contract covers 100 shares, so total profit or loss scales by multiplying per-share amount by 100.

2. What is the formula for a short call break-even price at expiration?

   $\text{BE} = \text{strike} + \text{premium received}$. For the short call seller, break-even is at the strike plus premium received, where gains from premium are offset by losses.

3. What is the maximum loss for a long put (per share) at expiration?

   $\text{Max loss} = \text{premium paid}$. The maximum loss is the premium if the put expires out-of-the-money, with the stock above the strike.

4. What is the general expiration profit formula (per share) for a short put?

   $\text{P/L} = \text{premium}-\max(0,\text{strike}-S)$. Profit equals premium minus intrinsic value if in-the-money; maximum gain is premium if out-of-the-money.

5. What is the general expiration profit formula (per share) for a short call?

   $\text{P/L} = \text{premium}-\max(0,S-\text{strike})$. Seller gains premium minus any intrinsic value if stock above strike; unlimited loss potential if deeply in-the-money.

6. What is the break-even for a long $50$ put purchased for a $3$ premium?

   $47$. The put breaks even when stock falls to $50 - $3, offsetting the premium cost.

7. What is the maximum gain for a long put (per share) at expiration?

   $\text{Max gain} = \text{strike} - \text{premium paid}$. Maximum profit occurs if the stock falls to zero, yielding the strike minus premium paid.

8. What is the maximum gain for a short put that receives a $2$ premium (per share)?

   $2$. Seller keeps the $2 premium as max gain if the put expires worthless.

9. What is the maximum gain for a long call (per share) at expiration?

   $\text{Max gain} = \text{unlimited}$. Gains are unlimited as the stock price can rise indefinitely above the strike after covering the premium.

10. What is the maximum loss for a short call (per share) at expiration?

    $\text{Max loss} = \text{unlimited}$. Losses are unlimited if the stock rises far above the strike, exceeding the premium received.

11. What is the maximum loss for a long call bought for a $4$ premium (per share)?

    $4$. The buyer forfeits the entire $4 premium if the call expires out-of-the-money.

12. What is the break-even for a long $50$ call purchased for a $3$ premium?

    $53$. Break-even requires the stock to reach $50 + $3 to cover the premium paid for the call.

13. What is the formula for a long call break-even price at expiration?

    $\text{BE} = \text{strike} + \text{premium}$. The break-even point occurs when the stock price equals the strike plus the premium paid, covering the cost of the option.

14. What is the maximum loss for a long call (per share) at expiration?

    $\text{Max loss} = \text{premium paid}$. The buyer loses the entire premium if the option expires worthless, as the stock never exceeds the strike.

15. Identify the expiration P/L per share: short $30$ call, premium $1$, stock at $35$.

    $-4$. Intrinsic value of $5 exceeds $1 premium, leading to $4 loss per share for the seller.

16. What is the maximum gain for a short call (per share) at expiration?

    $\text{Max gain} = \text{premium received}$. The seller keeps the premium as maximum gain if the call expires worthless, with stock below the strike.

17. Identify the expiration P/L per share: long $40$ call, premium $2$, stock at $45$.

    $3$. Intrinsic value of $5 exceeds $2 premium, yielding $3 profit per share at expiration.

18. What is the formula for a long put break-even price at expiration?

    $\text{BE} = \text{strike} - \text{premium}$. The break-even point is reached when the stock price falls to the strike minus the premium paid, offsetting the option's cost.

19. What is the general expiration profit formula (per share) for a long call?

    $\text{P/L} = \max(0,S-\text{strike})-\text{premium}$. Profit equals intrinsic value if in-the-money minus premium; zero intrinsic if out-of-the-money yields loss of premium.

20. Identify the expiration P/L per share: long $60$ put, premium $3$, stock at $52$.

    $5$. Intrinsic value of $8 minus $3 premium results in $5 profit per share.

21. What is the general expiration profit formula (per share) for a long put?

    $\text{P/L} = \max(0,\text{strike}-S)-\text{premium}$. Profit is intrinsic value if stock below strike minus premium; otherwise, loss equals premium paid.

22. What is the maximum gain for a short put (per share) at expiration?

    $\text{Max gain} = \text{premium received}$. The seller retains the premium as maximum profit if the put expires out-of-the-money.

23. What is the maximum loss for a short put (per share) at expiration?

    $\text{Max loss} = \text{strike} - \text{premium received}$. Maximum loss happens if stock falls to zero, requiring purchase at strike minus premium received.

24. Identify the expiration P/L per share: long $40$ call, premium $2$, stock at $39$.

    $-2$. Option expires worthless below strike, resulting in loss of the $2 premium per share.

25. What is the formula for a short put break-even price at expiration?

    $\text{BE} = \text{strike} - \text{premium received}$. The short put seller breaks even when the stock is at the strike minus premium received, balancing the premium income.

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