# What happens when the price is between the strikes?

## Calculating Profit or Loss on Medium Payout on Rolla

When you choose a Medium payout on Rolla, you are engaging in vertical option spreads. Sometimes, the expiration price lands between the strike prices, leading to partial gains or losses. The calculation method varies based on whether you're dealing with a Down (Call Spread) or Up (Put Spread) trade.

### For Down (Call Spread):

#### Inputs:

- High Strike (HS): The higher strike price in the spread.

- Low Strike (LS): The lower strike price in the spread.

- Expiration Price (EP): The price of the underlying asset at expiration.

- Trade Size (TS): The size of your trade.

- Premium Received (PR): The premium you received from the trade.

#### Formula:

Profit or Loss for Down = ((High Strike - Expiration Price) / (High Strike - Low Strike)) × Trade Size + Premium Received - Trade Size

#### Example for Down:

- Consider a scenario with strikes at $2367.80 (LS) and $2372.80 (HS), a net premium received of $4, collateral of $10, and an expiration price of $2372.44.

- Using the formula:

Profit or Loss = ((2372.80 - 2372.44) / (2372.80 - 2367.80)) × 10 + 4 - 10

- Result: This calculation results in a loss of approximately $5.28 per unit.

### For Up (Put Spread):

#### Inputs:

- High Strike (HS): The higher strike price in the spread.

- Low Strike (LS): The lower strike price in the spread.

- Expiration Price (EP): The price of the underlying asset at expiration.

- Trade Size (TS): The size of your trade.

- Premium Received (PR): The premium you received from the trade.

#### Formula:

Profit or Loss for Up = ((Expiration Price - Low Strike) / (High Strike - Low Strike)) × Trade Size + Premium Received - Trade Size

#### Example for Up:

- Consider a scenario with strikes at $2,374.68 (HS) and $2,369.68 (LS), a net premium received of $4, collateral of $10, and an expiration price of $2371.94.

- Using the formula:

Profit or Loss = ((2371.94 - 2369.68) / (2374.68 - 2369.68)) × 10 + 4 - 10

- Result: This calculation results in a loss of approximately $1.48 per unit.

### Key Points:

- The final profit or loss is calculated by considering the portion of the collateral that is returned based on where the expiration price lands relative to the strike prices, in addition to the premium received.

- A smaller loss occurs if the expiration price is closer to the Low Strike in Down trades, and closer to the High Strike in Up trades.

By applying these formulas, traders can accurately assess their potential profit or loss in medium payout spread trades on Rolla.

Updated on: 08/12/2023

Thank you!