Pay for a right, not an obligation
Imagine a simplified call granting its buyer the right to buy one troy ounce of silver for $30 at expiry. The buyer pays a $2 premium for that right. This is an invented teaching unit, not a listed silver option contract or a market quotation. Actual products specify their underlying, quantity, exercise style and settlement method; some silver options reference futures rather than a direct purchase of a physical ounce.
Separate payoff from net result
If the underlying silver value is $35 at expiry, the right to buy at $30 has $5 of intrinsic value. Subtract the $2 premium and the net result is a $3 gain before transaction costs and tax. The $5 payoff is not the same as the $3 profit. In formula form, the simplified expiry result is max(silver value − $30, 0) − $2. Both terms are measured for the same one-ounce exposure.
A smaller rise can still lose money
If silver is $31 at expiry, intrinsic value is $1 and the net result is a $1 loss after the premium. At $29, the call expires without intrinsic value and the buyer loses the $2 premium. Break-even is $32: the $30 strike plus the $2 premium, before other costs. Thus a higher metal price alone does not guarantee a profitable call purchase. The size of the move and the premium paid both matter.
The expiry diagram is not the whole contract
Before expiry, an option’s value also reflects time remaining, expected volatility and other pricing inputs. The simple expiry formula does not quote its resale value today. The buyer’s loss on the purchased option itself is limited to the premium plus costs; exercising into another position can create new exposure. The seller accepts different obligations, and an uncovered call writer can face very large losses. This illustration explains a payoff structure, not a recommended strategy.
Sources & further reading
- CME Group — Explaining Call Options: Short and Long ↗
- CME Group — Calculating Options Moneyness & Intrinsic Value ↗
- OCC Options Industry Council — Long Call ↗
Sources checked 14 November 2026. Reference organisations do not endorse this website. Price examples are hypothetical and educational.