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Record initiation cash flow
In an original one-unit call case, a holder pays premium 6 at initiation for strike 100. The writer receives 6. These are opposite sides of the same assumed payment. A terminal payoff should not replace or erase this earlier cash movement.
Use the price at the stated expiry
At hypothetical expiry price 110, the holder’s call settlement amount is 10 and the writer’s is −10. Simple unfinanced holder profit is 10−6 = 4. Writer simple profit is −10+6 = −4.
| Side | Initiation premium | Expiry settlement | Simple total |
|---|---|---|---|
| Long call | −6 | +10 | +4 |
| Short call | +6 | −10 | −4 |
Scale per-unit amounts once
If one fictional contract represents 100 units, those amounts are multiplied by 100. A premium already quoted per contract must not receive the multiplier again. Record the quote unit before computing a position total.
State the time-value simplification
Adding the initiation premium and expiry settlement without financing is a simple teaching profit measure. It is not a discounted NPV or actual transaction return after fees, taxes, early exercise or settlement adjustments. Those require additional inputs.