Buy Call - the buyer expects the price to rise in the future.
Maximum loss = premium paid
Maximum profit - unlimited, as the asset can continue to move up in price, gaining in value.
Sell Call - the seller expects the price to fall in the future.
Maximum profit = premium received
Maximum loss - unlimited, as the asset can continue moving upwards without any restrictions.
Buy Put - the buyer expects the price to fall in the future.
Maximum loss = premium paid
Maximum profit - unlimited, as the asset can continue to move downwards until the price reaches zero.
Sell Put - the seller expects the price to rise in the future.
Maximum profit = received premium
Maximum loss - unlimited, as the price can continue to move downwards until it reaches zero.
S - asset price
X - option price
Breakdown - Point of breakeven
(option price + premium when you receive it, or option-premium when you pay it)
