Manual Strategies in Profit Loss
You can also build an option or stock + option spread by adding legs manually.
Follow the steps below.
1. Add an option or a stock leg:
a. To add an option leg, click +Add Option Leg. Profit Loss adds another option row to the window.
b. To add a stock leg, click +Add Stock Leg.
Profit Loss adds a stock position to the Profit Loss Graph. This is required if you are building strategies, such as Covered Calls, where a stock position is part of the option spread.
The Profit Loss Tool has the ability to display a maximum of four legs per chart. This would include one stock position and up to three option legs simultaneously or four options legs. There can only be one stock position per profit loss chart.
One Stock + Three Options Legs
When you add the maximum amount of legs (four), +Add Option Leg and +Add Stock Leg will become disabled.
2. To remove an option or stock leg, in the Buy/Sell column, click the X to the left of the leg you want to remove
For either pre-selected strategies or manually built strategies, you can edit the individual option or stock position you would like to display in the Profit Loss graph.
- If you build the option spread manually, by default, the system sets the option to the nearest to the money call and sets the closest monthly expiration to Buy.
- If you select a preset strategy, the system builds the spread in accordance to preset option spread strategy descriptions. For details see Preset Strategies.
3. In the Buy / Sell list, select Buy or Sell
4. Select an expiration date in the following ways:
a. In the Expiration list, select the expiration date you want.
b. Click the Expiration Calendar icon. Click an available expiration date (denoted as circled dates).
i. To choose a different month or year, in the Month / Year List, select the month and year you want.
ii. To advance to the next month or to go back to the previous month, click the arrows.
5. In the Strike list, select the strike price you want.
6. In the Call / Put list, select the call or put you want.
7. To adjust the quantity of contracts or shares purchased or sold, in the Quantity box, enter the number of contracts or shares in the spread.
8. By default the price displays the current real time price of the option contract or stock.
9. To adjust the price to account for a position you are already in or if you would like to model a specific entry price, in the Price box, enter a new price.
10. When you are finished making changes, do the following
a. To apply the changes to the Profit Loss Graph, click Apply.
b. To cancel your changes and set the values you entered to the default values, click Cancel.
The Profit Loss graph updates to reflect the changes you made to the individual legs or the option spread.