that sort of thing keeps screwing with me… when they ask for the payoff, they’re not asking for the total profit, just the transaction (payoff) at option expiration so you don’t include the premium…
Smilar thing kept happening with the swaps. they’ll set up witha bond issue and a swap, then ask for the payment or duration resulting from the swap, and I keep thinking it includes the payment to the bond.
Guess i have o read the quetions more carefully.
eriq is right
payoff is just the difference between exercise price and spot price if favorable
there is a difference between cost, profit and payoff of an option