Payoff diagram
Definition · Level 1 · Options basics
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Chart 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 crosses zero at the breakeven.
Example
Long 100 call for 3: flat at −$300 below 100, +$100 per $1 above, zero at 103.
Where Tradecraft teaches it
Level 1 · Options basics, in the lesson “Payoff diagrams & approval levels”: The four basic hockey sticks, P&L before expiry, and why brokers tier permissions.
Related terms
- BreakevenUnderlying price at expiration where a position’s P&L is exactly zero after all premium paid or received: strike + premium for a long call, strike −…
- Options approval levelThe set of option strategies a broker permits an account after reviewing its experience, objectives and finances.
- 0DTE“Zero days to expiration”: options on their final trading day — little time value left, and near the money gamma and time decay are at their most…
- 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 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.