The horizontal line across the graph (the x-axis) represents the price movement of the underlying instrument - in this example, the share price of Microsoft. The vertical axis illustrates our profit/loss. The blue line is our payoff of our option position. You can see that the vertical dist...
Putting all this together for all possible stock prices gives the following payoff graph: The horizontal x-axis is the stock price at expiry. Short Call Option Payoff What if the trader had sold the call option rather than bought it, hoping that the stock would not rise above 100 and...
Important Tip - Notice that you no matter how far the price of the stock falls, you can never lose more than the cost of your initial investment. That is why the line in the call option payoff diagram above is flat if the closing price is at or below the strike price. Also note tha...
In that case, the call option payoff graph will look like this:You are free to use this image on your website, templates, etc.. Please provide us with an attribution link. As one can observe, the diagram clearly shows the profits or losses of the call option’s buyer. The horizontal ...
As you can see in the graph, the option's strike price (45.00) is the key point which divides the payoff function in two parts. Below the strike, the payoff chart is constant and negative (the trade is a loss). Above the strike the line is upward sloping, as the call option's pay...
More time to expiration, like higher volatility, will make OTM and ITM options behave like ATM ones. The graph becomes "fat". Chapter 10: Introduction to Spreading Scalping tries to make a market and make profit from liquidity. By observing the activity in a particular market, a scalper woul...
You might think that selling put options is very risky when looking at the payoff graph as the downside seems uncapped as the market price falls. However, shorting put options is a popular strategy for those who wish to buy stock but at a price that is lower than where it is currently ...
Let us look at the following put option purchaser’s payoff graph to better understand the concept. As one can observe, the above diagram shows the losses or profits generated by a trader who purchased a 3-month XYZ index put option at 34,000. Let us assume that David, the buyer, purch...
npm i react-option-charts or yarn add react-option-charts Usage <OptionPayoffChart seriesName="example" showPayoff s={96.5} r={.007} strategies={[{ name: 'Iron condor', color: "red", payoffColor: "blue", optionLegs: [{ k: 95, t: 45 / 365, v: .15, callPut: "put", quantity...
This is a graph of a protective put, which is a combination of owning the stock and purchasing a put on the same stock. The maximum loss on the put is its $2 cost. The statements regarding the maximum profit on a long call or a short put are true, but neither of these positions ...