Payoff

(1) For the option holder, this amount represents the excess, if any, of the spot price of the underlying over the exercise price in the case of a call option, or the excess, if any, of the exercise price over the spot price of the underlying in the case of a put option, considering the payoff cannot be negative. For the option writer, the payoff represents the same amount, but of opposite sign as the payoff is positive for the holder and negative for the writer. (2) The term payoff is sometimes used to designate the profit or loss, which takes account of the cost of the option, rather than the payoff, which does not. The profit or loss corresponds to the algebraic sum of the payoff, if any, and the premium. It also takes account of the commission paid, and of the premium and commission financing costs in certain models.