In this options trading math video, we are going to discuss the trading math to expiration for short call and short put trades.

In previous options trading basics videos, we discussed that a long option [calls or puts] expired at its intrinsic value, with the following characteristics:

- Long calls have intrinsic value when the option strike is lower than the expiration price
- The intrinsic value is the expiration price minus the call strike
- Long puts have intrinsic value when the option strike is higher than the expiration price
- The intrinsic value is the put strike minus the expiration price

Where the key to buying options, and having them being profitable at expiration, is to have more intrinsic value than what was paid for the option – the key to selling options, and having them be profitable at expiration, is for them to have more time value than what it was was sold for.

### Short Option Time Value

A short call has time value and profitability at expiration if: (1) the call strike sold is above the expiration (2) the call strike sold + the selling price is greater than the expiration.

- Sell 1 700c 2.50 with expiration below 700, then the entire sell price is time premium and also profit at expiration
- Sell 1 695c 5.00 with expiration at 698, then there is 3.00 of intrinsic value [698.00 – 695 = 3.00] BUT there is still 2.00 time value and profit – because the option strike + option sell price < expiration price

A short put has time value and profitability at expiration if: the put strike sold is below the expiration (2) the put strike sold – the selling price is less than the expiration.

- Sell 1 695p 2.50 with expiration above 695, then the entire sell price is time premium and also profit at expiration
- Sell 1 700p 5.00 with expiration 698, then there is 2.00 of intrinsic value [700 – 698.00 = 2.00] BUT there is still 3.00 time value and profit because the option strike – option sell price > expiration price

### Why Sell Options

Why sell options if the maximum profit is the price the option is sold for and there is no cap to the amount you can lose [like when you buy options]…watch the whole video 😛