Glossary › payoff diagram
Trading glossary · advanced
payoff diagram
A picture that shows how much a buy-or-sell ticket trade wins or loses at every possible final price.
The fuller meaning
A chart of profit or loss at expiry across final prices of the underlying. It shows the hockey-stick shapes of long and short calls and puts: a buyer's loss capped at the premium, a call seller's loss unlimited in theory, and each position's breakeven point.
payoff diagram, also called payoff.
Related words
at the money · backtest · backwardation · basis · call option · contango · data snooping · delta · edge · entry trigger