Hockey stick
Definition · Level 1 · Options basics
Keep reading with Tradecraft
Without a subscription, you can read three definitions every 30 days. Tradecraft explains all 988 terms and strategies, with the lessons that teach them, flashcards that come back before you forget, quizzes and a payoff lab.
The shape of a single option’s payoff at expiration: a flat line that turns into a straight slope at the strike.
Example
A long call: flat at −$200 up to the strike, then rising $100 for each $1 the stock climbs.
Where Tradecraft teaches it
Level 1 · Options basics, in the lesson “Payoff diagrams: the four hockey sticks”: Max profit, max loss and breakeven for the four single-option positions, and how to read the picture.
Related terms
- BreakevenUnderlying price at expiration where a position’s profit and loss is exactly zero after all premium paid or received: strike + premium for a long…
- Payoff diagramChart of a position’s profit or loss at expiration (vertical axis) against the stock price (horizontal axis): kinks sit at the strikes and the line…
- 0DTE“Zero days to expiration”: options on their final trading day.
- AM vs PM settlementWhether a cash-settled index option’s final value comes from opening prices on expiration morning (standard monthly SPX, last trade the day before)…
- American-styleExercisable on any business day up to and including expiration; the norm for US stock and exchange-traded fund (ETF) options.
- AssignmentNotice that an option you are short has been exercised, obliging you to sell (short call) or buy (short put) the stock at the strike.