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Financial Options Report – Biovivaplus Stock
Part 1: Long Call
A long call means you buy the right to purchase the stock at the strike price of 20 dollars. You pay a premium of 2.45 dollars for this right.
Relationship between payoff and stock price
If the stock price ends up above 20 dollars at maturity, the option gains value because you can buy the stock for 20 and immediately benefit from the higher market price. If the stock price stays at 20 or goes lower, the option expires worthless. Your maximum loss is the premium you paid.
Why this strategy is used
Investors choose a long call when they believe the stock will rise. It lets them benefit from an increase without committing large amounts of capital. Risk is limited to the premium.
When the payoff becomes beneficial
The long call becomes profitable only if the stock price rises above 22.45 dollars, which is the strike price plus the premium. Below this level, the investor loses part or all of the premium.
Part 2: Short Call
A short call means you sell the right to someone else to buy the stock from you at 20 dollars. You receive a premium of 2.45 dollars upfront.
Relationship between payoff and stock price
If the stock price stays at or below 20 dollars, the buyer will not exercise the option and you keep the full premium. If the price rises above 20 dollars, you lose money because you are forced to sell the stock at the strike price even though the market price is higher. Losses can grow without limit if the price keeps rising.
Why this strategy is used
Investors use a short call to earn income from the premium when they expect the stock to stay flat or fall.
When the payoff becomes beneficial
The best outcome is when the stock finishes at 20 dollars or lower. You simply keep the 2.45 dollar premium. Any stock price above 20 reduces your profit and can lead to losses.
Part 3: Long Put
A long put gives you the right to sell the stock for 20 dollars. You pay a premium of 2.21 dollars.
Relationship between payoff and stock price
If the stock price falls below 20 dollars, the put becomes valuable since you can sell the stock for more than its market value. If the price stays at or above 20, the option expires worthless and your loss is the premium.
Why this strategy is used
Investors buy puts when they expect the stock to decline or when they want protection against losses.
When the payoff becomes beneficial
The long put becomes profitable only if the stock falls below 17.79 dollars, which is the strike price minus the premium. Above this level, the put is either worthless or does not cover the full cost of the premium.
Part 4: Short Put
A short put means you sell the right to someone else to sell the stock to you at 20 dollars. You receive a premium of 2.21 dollars.
Relationship between payoff and stock price
If the stock price stays above 20 dollars, the put expires worthless and you keep the premium. If the stock price falls below 20, you start taking losses because you might be forced to buy the stock at the strike price even though the market price is lower. The lowest possible stock price is zero, so losses can be large.
Why this strategy is used
Investors use short puts to earn premium income when they expect the stock to remain steady or rise. It can also be used as a way to buy the stock if it drops, but at an effective discount because they keep the premium.
When the payoff becomes beneficial
The best outcome is when the stock price is above 20 dollars at maturity. You keep the full 2.21 dollar premium. Any price below 20 reduces your return.
