Week 10 Session: Options

A payoff-reasoning session: drawing what a simulated call and put are worth at expiry across a range of prices, then placing that shape next to Week 9’s straight line.

What you’re given#

A simulated call and a simulated put, each with a strike price and a premium, plus the straight-line futures payoff from Week 9 to compare against.

What you do#

Draw the payoff diagram for each option by hand across a range of possible expiry prices, marking the breakeven point and the flat region where the premium is the only cost. Place both diagrams next to the Week 9 futures line and state precisely where the shapes diverge and why.

What you produce#

Two hand-drawn payoff diagrams (call and put) with breakeven marked, plus a short written comparison against the futures contract’s linear payoff.

Why it matters#

This comparison is the working example the Strategy Lab and Rulebook assessments can both draw on when discussing derivatives.