Suppose IBM stock is trading at $100 per share and a trader purchases one IBM $100 call option for $2.00 per contract.
IBM is $105 at expiration. The buyer's profit would be $300 (+ $5 - $2)
IBM is at $101 at expiration. The buyer's loss would be $100 (+ $1 -$2)
IBM is below $100 at expiration and the call expires and is worthless. The loss is 100% of the premium paid ( - $200).
In all three scenarios, what would be the payoff for the seller? And why?
Wouldn't the seller have a payoff of the premium paid for the contract by the buyer in each and every scenario, meaning that in all scenario's he would have a gain of $200?
Can someone please explain what happens to the seller's payoff at expiration when the price of the asset is higher than the strike price and what happens to the seller's payoff when price of the underlying is lower than the strike price?