How to read payoff diagrams for options contracts

Payoff diagrams for options are more complicated than those of a futures contract.

In this video, Dr Hong Bo expains how the payoff structure of an options contract does not only depend on investors’ long or short position in the options market, but also depends on the type of the option, ie, whether it is a call option or a put option.

Use the diagrams in the downloads section to work through all the options in your own time: a long call, short call, long put and short put.