Notes:
When spot rate is higher than the strike price,
payoff = spot - strike; call option profit = payoff - premium
payoff = 0; put option profit = - premium
When spot rate is lower than the strike price,
payoff = 0; call option profit = - premium
payoff = - spot put option profit = payoff - premium
The above results are based on an option. Since options are a zero sum game, adding a negative sign in front of the above results will give you the payoff and profits when you are shoring an option.
To learn about payoff diagram, please check this excel file.
To learn about Black-Schole - Model, please check this excel file.
(Thanks to Dr. Greene for allowing me to share the above files for educational purposes)
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