Identifier: C4T6L4 | 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. Separate event scenario prices from expiry payoffs. 2. Reconcile volatility and direction effects. 3. Choose an event exposure within a paid-loss budget.

Prerequisite: C4T6L3.

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

An event can change the underlying and remove uncertainty at the same time. An option bought before the event pays for an already-priced distribution of outcomes. A favorable directional surprise can be insufficient if implied volatility falls and time passes. A short position can gain from uncertainty resolution but lose severely on an unexpectedly large move. Price an event decision through several conditional states and executable quote assumptions, not through a single volatility headline.

Price and return drivers

For a pre-expiry exit, profit = quantity × multiplier ×(sale bid −purchase ask) −all costs. The expiry payoff formula answers a different question. If a model table is supplied, identify it as conditional theoretical value and add a bid/ask execution boundary before calling it realizable. Linear Greek attribution is useful for small changes, but an event jump can change delta, gamma, skew and correlation together. Never add the model-repriced result to its Greek explanation.

Worked case

Long1 synthetic K100 call at ask7 and1 K100 put at ask6, multiplier100; debit1300, charges40. Event occurs with60 days still remaining. Supplied executable post-event combined bids: atS90,call1 and put12, total13; atS100,call3 and put3,total6; atS110,call12 and put1,total13. Net outcomes are−40,−740,−40. Even a10% move only recovers the original combined premium before fees under these supplied scenarios. These are synthetic bid scenarios; no particular volatility shift is claimed to imply them uniquely.

Adverse case

If held to expiry instead, S90,100,110 yields gross1000,0,1000, net−340,−1340,−340. AtS120, expiry net660. The difference shows that remaining option value at the post-event date matters. A gapS70 would produce straddle payoff3000 at expiry and net1660 for the long, but a matched short sold for1300 would lose1740 after40 charges. The short position’s maximum upside loss remains unbounded despite the three-state table.

Practical use

Use synchronized executable bids after the event at the intended exit time. Clearly distinguish a theoretical event stress table from actual available trading depth.

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

Use an event scenario table to test how large a move is required at the intended exit date. If only theoretical values are available, defer execution judgment until quote sides and size are supplied. Choose a bounded paid-premium position when the loss mandate requires it. Decline the event trade when all defensible scenarios fail the cost/benefit test or the investor cannot bear full premium loss. Missing an event trade is an acceptable baseline; it does not require inventing a directional view.

Practice and references

Exercise: one call bought at5, multiplier100, total charges20. Solution: After an event the underlying rises but supplied sale bid is4.20; net loss=420−500−20=−100. If instead held to expiryS108 with strike100, net=800−500−20=280. Neither result contradicts the other because the exit date and remaining uncertainty differ.

Takeaway: Event exit decisions use conditional bids at the intended date; expiry diagrams cannot supply next-day cash. Reference links: product card, formula; glossary: Volatility crush; Scenario valuation. Next: C4T6L5. 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