Calculate long call and long put payoffs and net profit

Identifier: C4T1L2 | Revision: 2026-10-26 | Planned study: 10–15 minutes, excluding extended practice.

Decision and objectives

Choose whether the method addresses this lesson’s task before placing an order. Objectives: 1. Build a five-state long-option payoff table. 2. Separate expiry proceeds from net profit. 3. Calculate cost-adjusted breakevens.

Prerequisite: C4T1L1.

All numbers, quotes, contract terms and dates in the case are hypothetical teaching assumptions, not a listed series or offer. Unless varied below, options are European, expire together in 90 calendar days, are cash settled in TRY, and use 100 underlying units per contract. Premiums are TRY per underlying unit, paid at entry; signed quantities identify long (+) and short (−) legs. Assume no distributions and zero financing for the isolated payoff, no holiday adjustment, and final cash on the next business day. Actual tax is excluded, not assumed zero.

Mechanics

A long call and a long put can each expire worthless. The buyer pays for the right to choose the beneficial contractual outcome. Do not subtract the premium inside the exercise decision: exercising an in-the-money right can reduce a loss even when the whole investment remains unprofitable. For a cash-settled European option the terminal calculation uses the contractual fixing, which may differ from a last screen trade. The fixing and cash date belong on the cash timeline.

Price and return drivers

Call payoff per unit is max(S − K, 0); put payoff is max(K − S, 0). Net profit deducts paid premium and all investor charges. For one contract with multiplier 100 and total fixed costs 20, cost per underlying unit is 0.20. A call costing 6 therefore breaks even at 106.20; a put costing 5 breaks even at 94.80. These are expiry thresholds under zero funding and tax exclusions, not predicted trading prices. Maximum contractual loss for the unfinanced buyer is the premium plus charges.

Worked case

Compare separate one-contract positions: long call K100 at premium 6 and long put K100 at premium 5. Each has TRY 20 total charges. The payoff table lists gross cash and net profit for each position.

At S105 the call is in the money by 5 but loses TRY 120. At S95 the put pays TRY 500 but loses TRY 20. Moneyness measures the right; profitability measures all cash flows.

Adverse case

The table’s S80, S100 and S120 rows are three different downside states for different views. The buyer’s floor remains −620 for the call and −520 for the put. Before expiry, supplied bids of 7 for the call and 3 for the put at S105 would give net close results +80 and −220 respectively. A put can retain time value while out of the money. These bids are illustrative executable scenarios; inserting S105 into the expiry formula would misstate the exit value.

Practical use

For an expiry plan obtain the official fixing and cash date; for an earlier close use the bid for the full quantity. Keep exercise proceeds and paid premium separate.

For any actual domestic implementation, verify the exact issue/contract, authorized intermediary, account permission and executable size. Include spread, commissions, passed-through fees, funding/borrow, custody and exercise/exit costs without double-counting embedded charges. Recheck income year, residency/status, issue/acquisition dates and effective tax law; all case results remain before actual tax.

Decision boundaries

Choose a long option when the paid premium fits a real loss budget and the expiry aligns with the need. A correct direction is insufficient if the move is too small or too late. A protection buyer may accept a negative option result because the protected asset rose. Avoid interpreting a percentage premium return as the return on the underlying notional. Decline when the required move exceeds the evidence or when no acceptable exit quote exists.

Practice and references

Exercise: long 2 calls K110 at premium 3.20, multiplier 100, total fees TRY 24. Solution: At expiry S118, payoff = 2 × 100 × 8 = TRY 1600; premium = TRY 640; profit = TRY 936. Cost per underlying unit is 24/200 = 0.12, so breakeven is 113.32. At S110 loss is TRY 664, demonstrating that an at-the-money expiry returns no option cash.

Takeaway: An in-the-money long option can still lose money; expiry breakeven must recover premium and costs. Reference links: product card, formula; glossary: Expiry payoff; Breakeven; Long option. Next: C4T1L3. Topic test.

Sources: Borsa Istanbul: Options (retrieved 2026-10-26; General information and basic concepts). Borsa Istanbul: Settlement Method (retrieved 2026-10-26; Settlement by contract family). Options Industry Council: All Strategies (retrieved 2026-10-26; Strategy descriptions). GIB: Provisional Article67 Guide for Individuals (retrieved 2026-10-26; Sections1,3–9 and19; publication introduction). Revision 2026-10-26; recheck changing terms before publication.

Shared reference guide