Single-Option Payoffs

Writing Options (Short Positions)

Short positions are the opposite of their long counterparts at expiry.

highlighted = computed this step

Short call payoff

A short call is the negative of the long-call payoff. At $120.00 a short call is $-20.00.

short call=−max⁡(S−K,0),\text{short call}=-\max(S-K,0),
Short call, K=$100Payoff at expiry.Short call, K=$100K=$100$80$100$120$-22.00$+0.00$+2.00Underlying price at expiryPayoff

Short put payoff

A short put is the negative of the long-put payoff. At $80.00 a short put is $-20.00.

short put=−max⁡(K−S,0),\text{short put}=-\max(K-S,0),
Short put, K=$100Payoff at expiry.Short put, K=$100K=$100$80$100$120$-22.00$+0.00$+2.00Underlying price at expiryPayoff

Assumptions and no advice

Writer payoffs are mirrored from long payoffs at expiry only. A short call's loss is unbounded as the price rises; a short put's loss is capped at the strike but can still be large. This is payoff geometry, not investment advice.

short= −long\text{short}=\,-\text{long}
Short put, K=$100Payoff at expiry.Short put, K=$100K=$100$80$100$120$-22.00$+0.00$+2.00Underlying price at expiryPayoff