Reading a payoff diagram
A payoff diagram shows your profit or loss at expiration (the vertical axis) for every possible price of the underlying (the horizontal axis). Where the line crosses zero is your breakeven. The flat parts show capped profit or loss; the sloped parts show where your result moves with the stock.
The four strategies here
- Long call — you pay a premium for the right to buy at the strike. Loss is capped at the premium; profit is theoretically unlimited above breakeven (strike + premium).
- Long put — the right to sell at the strike. Loss is capped at the premium; profit grows as the stock falls below breakeven (strike − premium).
- Covered call — you own the stock and sell a call against it for income. Premium lowers your breakeven; profit is capped at the strike.
- Cash-secured put — you sell a put and set aside cash to buy the shares if assigned. Profit is capped at the premium; risk grows as the stock falls.
Expiration onlyThis chart shows the outcome at expiration. Before expiration, time value and implied volatility move the price too — that's what the greeks describe.
Go deeper with Sereo Learn, or size your shares with the position size calculator.
Frequently asked questions
What is a payoff diagram?
A payoff diagram plots an option position's profit or loss at expiration against the price of the underlying. The horizontal axis is the underlying price, the vertical axis is profit or loss, and the point where the line crosses zero is the break-even price. It shows the shape of a position's risk at a glance — including where losses are capped and where they are not.
How do you calculate the breakeven on an option?
For a long call, break-even at expiration is the strike price plus the premium paid per share. For a long put it is the strike price minus the premium paid. For a covered call it is the stock purchase price minus the premium received, and for a cash-secured put it is the strike minus the premium received. Commissions and fees push each of these slightly further away.
Is the options payoff calculator free?
Yes. It is free with no sign-up, and everything is calculated in your browser. It shows the payoff at expiration only — it does not price the option before expiry, which also depends on time remaining and implied volatility.
