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Scale a short-call record into contract amounts

Three fictional 100-unit calls with strike 100, premium 6 and terminal price 110 have simple position profit −1,200.

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Compute represented quantity

The position is short three contracts, each representing 100 underlying units. Total represented quantity is 300. The quoted premium is 6 per unit, not 6 per contract.

Scale the premium receipt

The writer receives 300×6=1,800 at initiation. Holder payoff at S=110 is 10 per unit, so signed writer settlement is −300×10=−3,000.

Reconcile the simple position result

Simple profit is 1,800−3,000=−1,200. Dividing by 300 returns the per-unit writer profit of −4.

Original scaled position
MovementPer unitPosition amount
Premium receipt+6+1,800
Expiry settlement−10−3,000
Simple profit−4−1,200

Do not turn a scenario into a maximum loss

The loss of 1,200 belongs to S=110. A naked short call’s mathematical loss keeps growing with higher terminal price in this model. A finite plotted price range does not create a risk cap.

Further references