Visual explanation
How to read options payoff diagrams
A payoff diagram puts the stock price on the horizontal axis and the estimated strategy P/L on the vertical axis. The line shows how the result changes across expiration prices.
Left side: lower stock pricesCenter: near current priceRight side: higher stock prices
What the slope tells you
A rising line benefits from higher prices. A falling line benefits from lower prices. A flat segment means the strategy is capped or has reached a defined limit.
What the diagram does not show
It does not show the path before expiration, intraday fills, volatility repricing, or whether you can exit at the modeled price.
Primary reading: OIC Profit and Loss Simulator · FINRA options overview · SEC Investor Bulletin on options · OIC options pricing overview