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Payoff at expiry for the sale of a put option formula

Tags:  options valuation and pricing

Description of the Payoff at expiry for the sale of a put option formula

Formula for calculating the payoff of a short position in a put option.

Formula

Rsp=P−min((ST−K),0) 

Symbols

K        
Option strike price
P        
Value of the option premium
ST        
Price of the underlying at expiry date T of the option

The maximum gain for the sale of a put option is the amount of the option premium. The maximum loss is the difference between the option premium and the strike ST.

Additional information related to this formula

Related definitions from the glossary of financial terms

Option  •  Put option

Related calculators

Option strategy calculator   •   Pricing of an option (Black & Scholes)