Understand the position
A long call benefits at expiration from stock prices above its strike plus premium. A long put benefits below its strike minus premium. Both purchases can lose the whole premium if they expire without value. These statements concern the option position before it creates stock exposure through exercise.
The call example uses a $100 strike and $6 premium: $600 paid, maximum option loss $600, and expiration break-even $106 before costs. The put comparison uses a $100 strike and $5 premium: $500 paid, break-even $95, and maximum expiration option profit $9,500 if the stock reaches zero.
Read the payoff and try a scenario
Long call: profit and loss at expiration
- Buy one $100 call for $6 per share.
- Expiration break-even stock price: $106 before costs.
- The plot displays $70–$130 only. Move the control to $0 to examine a stock collapse; the right edge is not an upside bound.
Read the chart data
| Stock price at expiration · USD | Whole position P/L (Net P/L · USD per share) |
|---|---|
| 70 | -6 |
| 80 | -6 |
| 90 | -6 |
| 100 | -6 |
| 106 | 0 |
| 110 | 4 |
| 120 | 14 |
| 130 | 24 |
One contract per option leg; 100 shares where the strategy includes stock. Read the fixed position above before changing the price.
At stock $104 the call is worth $4 per share but loses $200 after its $600 entry cost. At $112 it gains $600. Move the control between these points to distinguish intrinsic value from net profit.
Long put: profit and loss at expiration
- Buy one $100 put for $5 per share.
- Expiration break-even stock price: $95 before costs.
- The plot displays $70–$130 only. Move the control to $0 to examine a stock collapse; the right edge is not an upside bound.
Read the chart data
| Stock price at expiration · USD | Whole position P/L (Net P/L · USD per share) |
|---|---|
| 70 | 25 |
| 80 | 15 |
| 90 | 5 |
| 95 | 0 |
| 100 | -5 |
| 110 | -5 |
| 120 | -5 |
| 130 | -5 |
One contract per option leg; 100 shares where the strategy includes stock. Read the fixed position above before changing the price.
For the put, stock $90 gives $10 intrinsic less $5 premium, or $500 profit per standard contract. At $100 or above, the put expires worthless. Compare the two slopes; they express opposite directional exposures but each has a deadline.
Separate expiration economics from live prices
The diagram calculates net profit or loss at expiration with the specified position intact. Before that date, remaining time, implied volatility, rates, dividends and bid–ask spreads affect each leg’s market value. A break-even shown here is an expiration break-even, not the price at which an early closing trade must be profitable.
For an actual position, calculate net execution costs and contract quantities, and verify every leg’s expiration, underlying and deliverable. The examples use one standard 100-share contract per leg. Adjusted contracts can differ; an incomplete or mismatched hedge changes the risk.
Understand the tradeoffs and obligations
A call’s theoretical upside is unbounded, while a put’s is limited because the underlying price cannot fall below zero in this stock example. Neither observation supplies a probability of success. Premium can be large around a known event, and an IV decline can offset a correct directional view before expiration.
Exercising can require buying or selling 100 shares at the strike. Buying power, short-stock consequences and broker procedures matter. A long put held without shares can create short stock if exercised; risk after exercise is not confined to the original premium.
At expiration, is the $100 call bought for $6 profitable when the stock is $104?
Show the explanation
No. Intrinsic value is $4 and premium paid was $6. Net loss is $2 per share, or $200 per standard contract before costs.
Sources and editorial notes
Original explanations and hypothetical examples prepared with AI assistance. Primary reference check dates are listed below. Numerical examples are hypothetical unless explicitly identified otherwise.
- OCC / OIC: Long Call
Position construction and risk tradeoffs. All premiums, strikes, payoff graphics, practice questions and calculations are original fictional examples, not copied charts or performance results. Checked October 17, 2026.
- FINRA / OCC: Understanding Assignment
Exercise, assignment, after-hours risk and broker cutoff considerations. Strategy diagrams assume intact matching positions through settlement. Checked October 17, 2026.
- OCC / OIC: Long Put
Position construction and risk tradeoffs. All premiums, strikes, payoff graphics, practice questions and calculations are original fictional examples, not copied charts or performance results. Checked October 17, 2026.