Options Payoff Diagram Builder
Options give their holder the right (but not the obligation) to buy or sell an underlying asset at a fixed strike price before or at expiration. A call option is the right to buy; a put option is the right to sell. At expiration, only the relationship between the stock price \(S_T\) and the strike \(K\) determines the option's value:
$$\text{Call payoff} = \max(0,\; S_T - K) \qquad \text{Put payoff} = \max(0,\; K - S_T)$$The payoff is the value of the position at expiration, ignoring what was paid to acquire it. The profit subtracts the initial premium (for longs) or adds it (for shorts). By combining options with stock positions or with other options, you can construct strategies with a wide range of payoff shapes — insurance, income generation, speculation on volatility, and more.
The visualization
Click a preset to load a strategy, or build your own by adding positions below. Toggle between the Profit and Payoff diagrams using the buttons in the control panel. Breakeven prices are shown where the profit line crosses zero.
Preset strategies
Add a position
Current positions
No positions yet. Click a preset or add one above.
Diagram type
Long profit: payoff − premium paid | Short profit: premium received − payoff
Payoff = value at expiration (ignores cost). Profit = payoff − net premium paid/received.
Key takeaways
- Option payoffs are piecewise linear. At expiration, the payoff function has a kink at the strike price where the option goes from worthless to in-the-money.
- Calls benefit from rising prices; puts benefit from falling prices. The maximum loss for a long option is the premium paid; the profit potential is unlimited for calls and large for puts.
- Short option positions reverse the payoff. The short seller receives the premium upfront but faces the opposite payoff profile — limited gain, larger potential loss.
- Combining positions creates new payoff shapes. A covered call caps upside but provides premium income. A protective put acts like insurance. A straddle profits from large moves in either direction.
- Profit accounts for the initial cost; payoff does not. The breakeven price(s) — where profit = 0 — depend on the premiums paid and received across all legs.