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I am learning fundamentals of option market and ran into an example I do not understand :

Let's assume I have a portfolio of 3 shares priced \$22, and a European call option to buy a share for \$21 in 3 months. If the stock price turns out to be \$22, the value of the option will be \$1. The text states that the value of my portfolio is $22*3-1 = \$65 $, why isn't is $22*3+1=\$67$ ? Thanks

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2 Answers 2

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If you are long the call option (you purchased it), the value will be as you said $22*3+1=67$.

If you are short the call option (you sold it), the value becomes: $22*3-1=65$

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As @Valometrics suggests, the only way you portfolio can be worth 65 is indeed that you are short that call. Otherwise it wouldn't make sense for it to be worth only 65 instead of 67

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