Please help in calculating profit/Loss in option writing


I’m a newbie to trading and currently learning options and futures. Although it seems obvious I get confused in calculating profit or loss. Assume the following trade and please help me with calculation.

  1. Sell 1 Lot of ITM USDINR 66.5CE February 26th Expiry at Rs 5.1925
  2. Sell 1 lot of ITM USDINR 75 PE February 26 expiry at Rs 3.1700

Total premium collected is Rs 8.3625

Now, on expiry if USDINR was at 71.5 how to calculate profit/loss? I read this strategy as short guts strategy and it was said that it is profitable as long as the underlying remains between strikes. But I think it is a loss as both are ITM shorting. Please help.


On expiry, if the RBI reference rate for USDINR is 71.5. Your positions will be settled at:

  1. USDINR 66.5 CE: 71.5- 66.5(Strike)= Rs 5(Profit of Rs 0.1925)
  2. USDINR 75 PE: 75(Strike)-71.5=Rs 3.5(Loss of Rs 0.33)

Your net P&L will be a loss 0.1375 or 137.5 per lot


Thanks for the explanation


Sorry to bother again. Please clarify what happens to the premium? Is the loss of 0.1375 is subtracted from premium received or the premium is wiped out already ?


When you sell short the contracts, you receive the credit in your account(Rs 5.1925 and Rs 3.17). One expiry, you pay the premium and the position is closed(Rs 5 and Rs 3.5). Hence, the net loss of Rs 0.1375