FTSE 100 options provide exposure to changes in the benchmark. A call benefits from a higher settlement value; a put benefits from a lower one. The premium must be recovered before the buyer makes a net profit at expiration.
How the call and put work
For a cash-settled index option, a call pays the positive difference between settlement value and strike, multiplied by the contract multiplier. A put pays the positive difference between strike and settlement value. Neither trade buys the individual component stocks.
The example uses ICE FTSE 100 with GBP 10 per index point. These are contract-scale examples with hypothetical prices; availability of a quoted expiry must be checked with the broker.
The example trade
Assume the underlying starts at 8,000 index points. One option has a strike of 8,000, a premium of 100 and a multiplier of 10. The total premium is GBP 1,000. Prices and premiums are hypothetical; the call and put use equal premiums to make the comparison easy.
The following results are at expiration, before fees. If exercise creates another position, the calculations assume that position is immediately closed at the stated value.
Buying FTSE 100 calls
You buy the call because you expect the underlying price to rise. At 8,300 index points, the right at the strike is worth (8,300 − 8,000) × 10 = GBP 3,000. After the premium, your profit is GBP 2,000.
At 8,000 or below, the call expires without intrinsic value and loses its GBP 1,000 premium. Its expiration breakeven is 8,100 index points. At 8,050, the price has risen but the trade still loses GBP 500.
Buying FTSE 100 puts
If you expect a fall instead, the put costs GBP 1,000 in this example. At 7,700 index points, it is worth (8,000 − 7,700) × 10 = GBP 3,000. Your profit is GBP 2,000 after the premium.
At 8,000 or above, the put loses its entire premium. Its expiration breakeven is 7,900 index points. A smaller fall to 7,950 still leaves a loss of GBP 500.
Before expiration
You can sell an option to close when a market is available. Its resale value also depends on time remaining and implied volatility, so the expiration breakevens do not determine every earlier trading result.
The purchased option can lose its full premium. Exercise may create a separate position or funding obligation. Selling an uncovered option can produce losses larger than the premium received.
FTSE 100 chart
This is the full index level, not necessarily the scale or official settlement value of your option. DJX uses one hundredth of the Dow level. Smaller index-option products use their own scales.
Open FTSE 100 chart on TradingView. The external chart is market context, not an executable option quote.
