Chart Elements within Profit Loss
In the middle of the Profit Loss window is the Profit Loss Graph. Located to the right is the Profit Loss Chart Summary and Payoff Table. The graph is displayed in a two axes chart; the horizontal axis represents the underlying stock price and the vertical axis represents profit or loss on the chosen strategy.
Profit Loss Graph Elements
By default, the Profit Loss Graph displays two scenarios of Profit and Loss. A vertical dashed line on the graph represents the current price of the underlying stock. A black line, which represents Profit or Loss at the date of the options expiration, represents the first scenario. To follow this curve to show future profit and loss levels, move the cursor along the line. As you move the cursor, the crosshairs allow you to line up the underlying price of the stock with how much gain or loss you will see on that position.
The second line, or the blue profit and loss line, represents the gain or loss at the present time. Based on the current real time quote, the profit and loss is at 0, which represents entering into the position at the current price. As with any scenario, you can view the profit and loss at different underlying stock prices my moving and aligning the cursor (crosshairs) with the different scenario lines.
The graph below illustrates a projected profit of $91.83 if the underlying price hits $179.01 on the day the option expires.
The background color of the Profit Loss Graph is shaded. The Red shaded portion is based on potential loss and the green shaded portion indicates areas where you would see profits on the position. The shaded areas are based on the underlying stock price at expiration.
Adjusting the Graph View
To zoom in or out of the Profit Loss Graph, move the slider bars to the right and at the bottom. Using the slider, you can project additional gains or losses as the underlying stock has larger moves.
To adjust the position of the Profit Loss Graph, drag the chart either right or left.
P & L Chart Summary Elements
The P & L Chart Summary shows the breakeven (up and down) as well as maximum risk and maximum profit on the selected spread or position. These field or element calculations are based on stock prices on the day of expiration (black line).
- Breakeven: There are two break-even points (Brkeven up or Brkeven dn) because there are scenarios that could have multiple breakeven points. Brkeven (up) will display the breakeven at the higher stock price while Brkeven (dn) displays the breakeven at the lower stock price.
- Max Risk: This represents the maximum dollar amount you could lose of the option or spread expires with no value. If the maximum is INF,this implies that there is no maximum value and the number is infinite. Max Profit is the most money that could be made with the displayed spread or option; again, INF implies no limit to potential gains.
- Payoff Table: Based on the first and last prices on the Profit Loss Graph, the Payoff Table takes pre-selected values and displays them automatically to give a snapshot of prices that will return profits and losses. To see exact prices, you can follow the scenarios on the graph itself. In the above example, if IBM reaches a price of $205.00 on the day of expiration the results would be a $478.00 gain.
- Show Chart: To display a copy of the daily chart of the underlying stock next to the Profit Loss Graph, click Show Chart. Using the chart, you can identify key areas and compare them to profit and loss on your spread or option position.