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Finding the payoffs in the ‘Probability in Finance’

Finding the payoffs in the ‘Probability in Finance’


Hi There,
In the course video, in min 3.55, the price of $100 was subtracted from the profit of $1000, hence $900 is displayed, in ‘Call’ leaf.
If you follow, similar logic, then instead of the -$1100 quote you should deduct the -$100 amount to make it -$1200.
Please suggest if my understanding is correct.
Sambodhan D.

1 Answer

365 Team

Hey Sambodhan,

So, the – $1,100 comes from losing $100 on each of the 10 stocks you bought (since the price is now 1,000, instead of 1,100) and the premium. Hence, in that scenario, we\’re would be paying 10 * 1,100 + 100 = $11,100 for something that is only worth 10 * 1,000 = $10,000. Thus, 10,000 – 11,100 = – 1,100 is the payoff in this scenario.


365 Vik