The breakeven point (that indicates no profit and no loss) is usually centered on the y-axis, with profits shown above this point (higher along the y-axis) and losses below this point (lower on the axis). When the graph line is on $25 (the cost per share), note that the profit and loss value is $0.00 (breakeven).
As the stock price moves higher, so does the profit; conversely, as the price moves lower, the losses increase. The figure shows the position breaks even at $25 (our purchase price) and as the stock's price increases (moving right along the x-axis) the profits correspondingly increase. In this example, shown in Figure 10, a call option has a strike price of $50 and a $200 cost (for the contract).
If the option expires worthless (for example, the stock price was $50 at expiration), the loss would be $200, as shown by the graph line interested the y-axis at a value of negative 200. The breakeven point would be a stock price of $52 at expiration; here, the investor has "lost" $200 by paying the premium and the stock's rising price is equal to a $200 gain, canceling out the premium. Figure 11, taken from the Options Industry Council's Web site, shows various options strategies and the corresponding profit and loss diagrams.
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