Options Education
When stock price < strike price, call option has zero payout at expiry. Since an option buyer has purchased the instrument by paying upfront premium, overall P&L in this case is the loss of the premium paid. P&L: Loss Capped at Premium Paid.
A call option seller receives premium as a credit. When stock price is above strike price at expiration, a call option seller has to pay the difference between the stock price and strike price. P&L: Unlimited Loss, High Risk.
A put option payout will be difference between strike price and stock price. If stock price is less than strike price, a put buyer makes money and zero otherwise. P&L: Loss Capped at Premium Paid.
A put option seller will receive a credit premium and will have to pay if stock price on expiry date is less than strike price. P&L: Unlimited Loss, High Risk.