Payoff Diagrams & Breakevens

A payoff diagram plots profit and loss versus stock price at a chosen date (often expiration). It is the fastest way to see risk shape.

Reading a P/L chart

• Horizontal axis — underlying price at the evaluation date.
• Vertical axis — dollars of profit or loss (include premium paid/received).
• Zero line — breakeven region(s) where P/L crosses from loss to profit.

At expiration vs before expiration

At expiration, options settle to intrinsic value — the classic “hockey stick” shapes. Before expiration, curves are smoother because remaining time value (and IV) still matter. Our calculator uses Black–Scholes for pre-expiry theo values and intrinsic at expiry.

Max profit, max loss, breakeven

• Max profit — best-case P/L in the model (sometimes unlimited).
• Max loss — worst-case P/L (sometimes unlimited for naked shorts).
• Breakeven — stock price(s) where total P/L is zero after premium.

Example: long call strike 100, premium $3 → expiration breakeven ≈ $103. Profit only above that after the debit.

Heatmaps

A date × price heatmap shows how P/L evolves as time passes — essential for calendars, diagonals, and short premium where path and timing matter, not only the final pin.

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