Interest rate call/put

[passcfaforsure]

Dear All:
I am very confused about this concepts: For example, I long interest rate call (5%) meaning I have a right to borrow at 5% if interest rate goes up , I have a gain; I short interest rate put (5%) meaning I have a right to lending at 5%, if interest falls , I gain.
My question is: what if I short the interest rate call, does it mean I have a right to borrowing or lending? the same for short interest put? any tips that is easy for me to understand this concept?
thank you so much for your time

 

[aaronhotchner]

I am almost positive that shorting an interest rate put will never give you a right to lend (shorts only give you obligations), but I’m going from memory so there’s a chance that I’m wrong.
Being long a call means you get to exercise the option, but being short a put means you would collect the premium of the unexercised put.
If you short a call, again, you wouldn’t have a right to anything. You collect a premium and you win if interest rates don’t rise.

 

[cipherap15]

Interest Rate Call optoin
An interest rate derivative in which the holder has the right to receive an interest payment based on a variable interest rate, and then subsequently pays an interest payment based on a fixed interest rate.
You would gain if the floating rate increases. The payment you receive will be higher. You’re not thinking about it correctly

 

[Galli]

passcfaforsure wrote:
My question is: what if I short the interest rate call, does it mean I have a right to borrowing or lending? the same for short interest put? any tips that is easy for me to understand this concept?

If you’re short an interest rate call, you’re selling the right to borrow at the call’s strike. Said another way, you’re somewhat long interest rate up until the strike, then you’re short up until infinity. You’re betting the market rate at expiration will be < strike rate and you’re paid a premium for baring the infinite risk above the strike.
I couldn’t find a payoff diagram on the interweb but this is how it’ll look visually:
http://www.optiontradingtips.com/images/payoff-short-call-option-microso...