Option Payoff (include option premium or exclude??)

R25 Fixed Income Portfolio Mgt II

Credit Spread Option-

Payoff calculation= Max[(Spread at the option maturity-K) X Notional Amt X Risk Factor,0]

------ I don’t understand why the premium paid is not as a part of the consideration??

2009 Mock exam has questions provide the premium but didn’t incl in the payoff calculation… (But unfortunately I include…>

R37 Risk mgt Application of Option Strategies

eg, Bull call strategies.

Payoff= Max (0x ST-XL)-Max…-CL0+CH0

------ here counts all the premiums…

Maybe I am in the final stage… feeling stress& confused…

Pls someone can help?

As far as I know, payoff = the value at expiration profit = payoff - premium

Can you give a page# for “Payoff= Max (0x ST-XL)-Max……-CL0+CH0”?