NIFTY 50₹22,500▲125.30(0.56%)•
SENSEX₹74,200▲412.50(0.56%)•
BANK NIFTY₹48,300▼210.40(0.43%)•
TATA MOTORS₹780.00▲12.45(1.62%)•
INFOSYS₹1,520.00▼18.20(1.18%)•
WIPRO₹475.00▲5.60(1.19%)•
RELIANCE₹2,890.00▲34.50(1.21%)•
TCS₹3,650.00▼28.10(0.76%)•
HDFC BANK₹1,580.00▲15.20(0.97%)•
ICICI BANK₹1,120.00▲8.90(0.80%)•
SBI₹820.00▼5.30(0.64%)•
BHARTI AIRTEL₹1,650.00▲22.80(1.40%)•
HUL₹2,380.00▼12.40(0.52%)•
ITC₹445.00▲3.20(0.72%)•
KOTAK BANK₹1,780.00▲14.60(0.83%)•
LT₹3,420.00▼45.20(1.30%)•
AXIS BANK₹1,080.00▲9.50(0.89%)•
BAJAJ FINANCE₹7,200.00▲85.40(1.20%)•
MARUTI₹12,400▼150.00(1.19%)•
ASIAN PAINTS₹2,850.00▲18.90(0.67%)•
HCLTECH₹1,420.00▼16.30(1.14%)•
TITAN₹3,250.00▲42.60(1.33%)•
ADANI PORTS₹1,380.00▼22.40(1.60%)•
POWER GRID₹310.00▲4.80(1.57%)•
NTPC₹365.00▲6.20(1.73%)•
SUNPHARMA₹1,680.00▼8.50(0.50%)•
NIFTY 50₹22,500▲125.30(0.56%)•
SENSEX₹74,200▲412.50(0.56%)•
BANK NIFTY₹48,300▼210.40(0.43%)•
TATA MOTORS₹780.00▲12.45(1.62%)•
INFOSYS₹1,520.00▼18.20(1.18%)•
WIPRO₹475.00▲5.60(1.19%)•
RELIANCE₹2,890.00▲34.50(1.21%)•
TCS₹3,650.00▼28.10(0.76%)•
HDFC BANK₹1,580.00▲15.20(0.97%)•
ICICI BANK₹1,120.00▲8.90(0.80%)•
SBI₹820.00▼5.30(0.64%)•
BHARTI AIRTEL₹1,650.00▲22.80(1.40%)•
HUL₹2,380.00▼12.40(0.52%)•
ITC₹445.00▲3.20(0.72%)•
KOTAK BANK₹1,780.00▲14.60(0.83%)•
LT₹3,420.00▼45.20(1.30%)•
AXIS BANK₹1,080.00▲9.50(0.89%)•
BAJAJ FINANCE₹7,200.00▲85.40(1.20%)•
MARUTI₹12,400▼150.00(1.19%)•
ASIAN PAINTS₹2,850.00▲18.90(0.67%)•
HCLTECH₹1,420.00▼16.30(1.14%)•
TITAN₹3,250.00▲42.60(1.33%)•
ADANI PORTS₹1,380.00▼22.40(1.60%)•
POWER GRID₹310.00▲4.80(1.57%)•
NTPC₹365.00▲6.20(1.73%)•
SUNPHARMA₹1,680.00▼8.50(0.50%)•
NIFTY 50₹22,500▲125.30(0.56%)•
SENSEX₹74,200▲412.50(0.56%)•
BANK NIFTY₹48,300▼210.40(0.43%)•
TATA MOTORS₹780.00▲12.45(1.62%)•
INFOSYS₹1,520.00▼18.20(1.18%)•
WIPRO₹475.00▲5.60(1.19%)•
RELIANCE₹2,890.00▲34.50(1.21%)•
TCS₹3,650.00▼28.10(0.76%)•
HDFC BANK₹1,580.00▲15.20(0.97%)•
ICICI BANK₹1,120.00▲8.90(0.80%)•
SBI₹820.00▼5.30(0.64%)•
BHARTI AIRTEL₹1,650.00▲22.80(1.40%)•
HUL₹2,380.00▼12.40(0.52%)•
ITC₹445.00▲3.20(0.72%)•
KOTAK BANK₹1,780.00▲14.60(0.83%)•
LT₹3,420.00▼45.20(1.30%)•
AXIS BANK₹1,080.00▲9.50(0.89%)•
BAJAJ FINANCE₹7,200.00▲85.40(1.20%)•
MARUTI₹12,400▼150.00(1.19%)•
ASIAN PAINTS₹2,850.00▲18.90(0.67%)•
HCLTECH₹1,420.00▼16.30(1.14%)•
TITAN₹3,250.00▲42.60(1.33%)•
ADANI PORTS₹1,380.00▼22.40(1.60%)•
POWER GRID₹310.00▲4.80(1.57%)•
NTPC₹365.00▲6.20(1.73%)•
SUNPHARMA₹1,680.00▼8.50(0.50%)•
NIFTY 50₹22,500▲125.30(0.56%)•
SENSEX₹74,200▲412.50(0.56%)•
BANK NIFTY₹48,300▼210.40(0.43%)•
TATA MOTORS₹780.00▲12.45(1.62%)•
INFOSYS₹1,520.00▼18.20(1.18%)•
WIPRO₹475.00▲5.60(1.19%)•
RELIANCE₹2,890.00▲34.50(1.21%)•
TCS₹3,650.00▼28.10(0.76%)•
HDFC BANK₹1,580.00▲15.20(0.97%)•
ICICI BANK₹1,120.00▲8.90(0.80%)•
SBI₹820.00▼5.30(0.64%)•
BHARTI AIRTEL₹1,650.00▲22.80(1.40%)•
HUL₹2,380.00▼12.40(0.52%)•
ITC₹445.00▲3.20(0.72%)•
KOTAK BANK₹1,780.00▲14.60(0.83%)•
LT₹3,420.00▼45.20(1.30%)•
AXIS BANK₹1,080.00▲9.50(0.89%)•
BAJAJ FINANCE₹7,200.00▲85.40(1.20%)•
MARUTI₹12,400▼150.00(1.19%)•
ASIAN PAINTS₹2,850.00▲18.90(0.67%)•
HCLTECH₹1,420.00▼16.30(1.14%)•
TITAN₹3,250.00▲42.60(1.33%)•
ADANI PORTS₹1,380.00▼22.40(1.60%)•
POWER GRID₹310.00▲4.80(1.57%)•
NTPC₹365.00▲6.20(1.73%)•
SUNPHARMA₹1,680.00▼8.50(0.50%)•
Mera SIP by Trustner
NISM VIII — Equity Derivatives (14/25)
NISM VIII — Equity Derivatives ~5 min read

Option Payoffs — Long Call, Short Call, Long Put, Short Put

Option payoffs are asymmetric and non-linear. Long Call has limited loss (premium) and unlimited profit. Short Call has limited profit (premium) and unlimited l...

Definition

The Four Basic Option Positions

Option payoffs are asymmetric and non-linear. Long Call has limited loss (premium) and unlimited profit. Short Call has limited profit (premium) and unlimited loss. Long Put has limited loss (premium) and high-but-capped profit. Short Put has limited profit (premium) and high-but-capped loss.

In Simple Words
💡

The payoff of every option position is fundamentally a hockey-stick shape. Long Call: loses premium until Spot > Strike, then profits ₹1 per ₹1 rise. Short Call: earns premium until Spot > Strike, then loses ₹1 per ₹1 rise (mirror of Long Call). Long Put: loses premium until Spot < Strike, then profits ₹1 per ₹1 fall; maximum profit when Spot = 0 equals (Strike − Premium). Short Put: earns premium until Spot < Strike, then loses ₹1 per ₹1 fall. Breakeven for Call = Strike + Premium; for Put = Strike − Premium.

🏒
Hockey-Stick Payoff

Flat then sloping line — unique to options

⚖️
Asymmetric Risk

Premium capped one side, move-driven other side

🔄
Buyer ≠ Seller Mirror

Long and short payoffs are mirror images

🎯
Breakeven = Strike ± Premium

Call → Strike + Premium; Put → Strike − Premium

Real-Life Scenario

A Practical Example

📐
Option Payoff Summary
Max profit / max loss / breakeven for each basic position
PositionMax ProfitMax LossBreakevenView
Long CallUnlimitedPremium paidStrike + PremiumStrongly Bullish
Short CallPremium receivedUnlimitedStrike + PremiumMildly Bearish/Neutral
Long PutStrike − PremiumPremium paidStrike − PremiumStrongly Bearish
Short PutPremium receivedStrike − PremiumStrike − PremiumMildly Bullish/Neutral
Key Points to Remember

What Makes This Important

💰
Long Call: bullish, max loss = premium, max profit = unlimited, BE = K + P
🤖
Short Call: neutral-to-bearish, max profit = premium, max loss = unlimited, BE = K + P
🪙
Long Put: bearish, max loss = premium, max profit = K − P, BE = K − P
⚖️
Short Put: neutral-to-bullish, max profit = premium, max loss = K − P, BE = K − P
🎯
Payoff shape is "hockey stick" — flat until strike, sloping beyond
🧠
Call buyer + Call writer is zero-sum — mirror payoffs
⏸️
Option seller collects time decay every day
The Formula

Four Option Payoffs

Four Option Payoffs
Long Call P&L = max(0, ST − K) − P
Short Call P&L = P − max(0, ST − K)
Long Put P&L = max(0, K − ST) − P
Short Put P&L = P − max(0, K − ST)
ST — Spot price on expiry
K — Strike price
P — Premium
FAQs

Frequently Asked Questions

No. A put buyer's maximum loss is exactly the premium paid — no matter how high the spot rallies, the put simply expires worthless.

Test Your Knowledge

🧠 Quick Quiz

2 questions to check your understanding

2
Questions
Question 1 of 2

A trader buys a Nifty 22,500 Put at ₹120. Breakeven is _____.

Summary Notes

Key Takeaways

4 basic positions — long/short call, long/short put
Buyer max loss = premium paid; writer max profit = premium received
Breakeven = Strike ± Premium (call+, put−)
Related Topics

Continue Learning

📖
Options — Call, Put, Buyer, Writer
→
📖
Moneyness, Intrinsic Value and Time Value
→
📖
Hedging Strategies — Protective Put, Covered Call, Beta Hedge
→
←
Previous Topic
Moneyness, Intrinsic Value and Time Value
Option Payoffs — Long Call, Short Call, Long Put, Short Put — NISM VIII — Equity Derivatives