Question

1. Payoff/profit of put/call?
2. Payoff diagrams recognition (plain vanilla or strategies/combo)
3. Profit diagrams recognition (plain vanilla or strategies/combo)
4. Put-call parity concept
5. Strategies: concepts. Eg. What strategy consists of what.
6. Relationship between option value and other factors

Answer 1

1. Payoff/ Profit of PUT/CALL:

- Call Option is right to BUY without Obligation and Put Option will give you right to sell without Obligation.

When We are Buying Option the Risk is Limited to premium only and the Opportunity of Earning Profit is Unlimited.

Where as if we Talk about Selling of the Call and Option the profit is limited to Premium where as the Loss can be Unlimited.

2. Payoff Diagrams recognition(Plain Vanila or strategies/combo)

-  A vanilla option gives the holder the right to buy or sell the underlying asset at a predetermined price within a specific timeframe. This call or put option comes with no special terms or features. It has a simple expiration date and strike price. Investors and companies will use them to hedge their exposure to an asset or to speculate on an asset's price movement.

- As it is Following the Simple Pattern where both Buyer and Seller have their right and Obligation The Payoff of the Buyer is Limited to Premium and the Seller have Unlimited Risk.

3. Profit Diagrams Recognition(Plain Vanila or strategies/combo)

-  A vanilla strategy is a basic where is Opportunity of Earning the Profit in this Strategy wiuld have increased as per the Market in Scenrio As a Buyer the Profit can be Unlimited and Seller have Profit Limited to the Premium it have paid,

4. Put-call Parity Concept

-  It defines a relationship between the price of a call option and put option,Where both with the same strike price and expiry, namely that a portfolio of a long call option and a short put option is equivalent to and hence has the same value as a single forward contract at this strike price and expiry. This is because if the price at expiry is above the strike price, the call will be exercised, while if it is below, the put will be exercised, and thus in either case one unit of the asset will be purchased for the strike price, exactly as in a forward contract.

5. Strategies: concepts. Eg. What strategy consists of what:

- Option strategies are the simultaneous, and often mixed, buying or selling of one or more options that differ in one or more of the options' variables. which is basically gives Advantages to have Edge according to the Market.  

Such As, Covered Call , Butterfly, Calender etc.

6. Relationship between option value and other factors :

- Other Factor which are Below will be As folliow

Unlying

Impect of Exercise Price

Time to Expiration

Volatility changing