u***1
发帖数: 179 | 1 Problem 1.4: Explain carefully the difference between selling a call option
and buying a put option.
The solution from the solution manual is: Selling a call option involves
giving someone else the right to buy an asset from you. It gives you a
payoff of -max{S_T-K, 0} = min{K-S_T, 0}.
BUT my understanding is: suppose the strike price for the call option is K,
I am selling the call option at the price of S_T, then my payoff would be
max{S_T-k, 0}, which is opposite to the solution manual.
What's | m******n
发帖数: 354 | 2 plus sign for payoff means you get the money from the counterparty,
minus sign for payoff means you pay the money to the counterparty.
that's only the englich expression thing. | u***1
发帖数: 179 | 3 Thanks!
But my question is my answer is opposite to the solution manual.
For example, suppose S_T > K, my answer is that I can earn S_T-K,
but the solution manual said I will lose S_T-K.
Help me out! I am confused!
Thanks!
【在 m******n 的大作中提到】
: plus sign for payoff means you get the money from the counterparty,
: minus sign for payoff means you pay the money to the counterparty.
: that's only the englich expression thing.
| m******n
发帖数: 354 | 4 oh, my god!
you sell the call option, if S_T > K, you of course lose money,
and what if you buy the call?
please read the chapter carefully again! | u***1
发帖数: 179 | 5 oh, I see!
I had thought I were the buyer of the call option!
Thanks! |
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