Dow Jones Industrial Average 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 DJX (one hundredth of the Dow) with USD 100 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 400 index points. One option has a strike of 400, a premium of 5 and a multiplier of 100. The total premium is USD 500. 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 Dow Jones Industrial Average calls
You buy the call because you expect the underlying price to rise. At 420 index points, the right at the strike is worth (420 − 400) × 100 = USD 2,000. After the premium, your profit is USD 1,500.
At 400 or below, the call expires without intrinsic value and loses its USD 500 premium. Its expiration breakeven is 405 index points. At 402.5, the price has risen but the trade still loses USD 250.
Buying Dow Jones Industrial Average puts
If you expect a fall instead, the put costs USD 500 in this example. At 380 index points, it is worth (400 − 380) × 100 = USD 2,000. Your profit is USD 1,500 after the premium.
At 400 or above, the put loses its entire premium. Its expiration breakeven is 395 index points. A smaller fall to 397.5 still leaves a loss of USD 250.
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.
Dow Jones Industrial Average 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 Dow Jones Industrial Average chart on TradingView. The external chart is market context, not an executable option quote.