## Options profit loss graph,free binary trading robot,stockbrokers botswana,currency exchange rates - Plans On 2016

12.09.2015 admin
A profit and loss diagram, or risk graph, is a visual representation of the possible profit and loss of an option strategy at a given point in time. For every dollar the stock price falls once the \$47.06 breakeven barrier has been surpassed, there is a dollar for dollar profit for the options contract. To summarize, in this partial loss example, the option trader bought a put option because they thought that the stock was going to fall. Buying put options has many positive benefits like defined-risk and leverage, but like everything else, it has its downside, which is explored on the next page. Risk Graphs are therefore an essential option trading tool which all option traders need to eventually master for long term option trading success. Here, we will explore exactly what Risk Graphs are, how to read and how to build a Risk Graph. Find Out How My Students Make Over 87% Profit Monthly, Confidently, Trading Options In The US Market! Risk Graphs are simple diagrams made up of 2 axis and a line representing option price at various stock prices. Risk Graphs are usually centered with the current stock price in the center of the diagram.
Rish Graph moves to the right, the graph line tells you what happens to the option price as stock prices increase. Conversely, if the bottom end of the profile risk graph line is pointing groundwards, it is an option trading strategy with unlimited loss potential.

An option trading strategy turns a profit when the profile risk graph line crosses above the X-Axis (horizontal Axis). The Breakeven Point of an option trading strategy is presented on a profile risk graph as the point where the graph line touches the X-Axis (horizontal Axis). For every dollar the stock price rises once the \$53.10 breakeven barrier has been surpassed, there is a dollar for dollar profit for the options contract.
To summarize, in this partial loss example, the option trader bought a call option because they thought that the stock was going to rise.
Buying call options has many positive benefits like defined-risk and leverage, but like everything else, it has its downside, which is explored on the next page. Option traders use profit and loss diagrams to evaluate how a strategy may perform over a range of prices, thereby gaining an understanding of potential outcomes. One look at the shape formed by the graph line instantly tells a truck load of information to a learned option trading practitioner. Because of the visual nature of a diagram, traders can evaluate the potential profit and loss, and the risk and reward of the position, at a glance.To create a profit and loss diagram, values are plotted along X and Y axes. The vertical axis (the y-axis) represents the potential profit and loss values for the position. Likewise, if the stock moved up, irrelavent by how much it moved upward, then the option trader would still lose the \$0.44 paid for the option. Likewise, if the stock moved down, irrelavent by how much it moved downward, then the option trader would still lose the \$0.60 paid for the option.

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.
Since there is, in theory, no upper limit to the stock's price, the graph line shows an arrow on one end. 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. 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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