Options Tools
Options Strategy Payoff Builder
Build and analyze multi-leg options strategies at expiration.
Configure up to four option legs, choose a preset strategy, or build a custom position. The builder calculates net premium collected or paid, maximum profit, maximum loss, and break-even prices at expiration. Unbounded risk is flagged explicitly.
Direct Answer
An options payoff diagram shows profit or loss at expiration for every underlying price. For multi-leg strategies such as spreads and condors, individual leg payoffs combine into one net curve that reveals max profit, max loss, and break-even prices at a glance. Strategies with a naked short call have theoretically unlimited max loss and must be understood before trading.
Options Strategy Payoff Builder
Calculations model expiration-date payoffs only. No time value, dividends, early exercise, or transaction costs unless you enter commissions. For education only. Not investment advice.
All calculation happens locally in your browser. No values are sent to any server or captured in analytics.
How Multi-Leg Options Payoffs Work
Every option leg produces a payoff at expiration that depends only on where the underlying price lands relative to that leg's strike. For a long call with strike K and premium paid P, the payoff per share is max(S - K, 0) - P. For a short call, it is P - max(S - K, 0). Puts work the same way with the signs reversed on the strike comparison.
A multi-leg strategy adds up the payoffs of every leg at each underlying price. Because each leg is evaluated independently and then summed, the combined payoff curve can have a complex shape with multiple slopes, plateaus, and inflection points depending on the strikes, positions, and premiums chosen.
The key outputs the builder derives from that curve are:
- Net premium: total cash received (credit) or paid (debit) when the position is opened.
- Maximum profit: the highest point on the payoff curve, or "unlimited" when a long call is uncovered by a higher-strike short call.
- Maximum loss: the lowest point on the payoff curve, or "unlimited" when a short call is uncovered by a higher-strike long call.
- Break-even prices: the underlying prices where the payoff curve crosses zero.
Common Multi-Leg Strategies
| Strategy | Legs | Max profit | Max loss | Outlook |
|---|---|---|---|---|
| Bull call spread | Long low-strike call + short high-strike call | Spread width minus net debit | Net debit paid | Moderately bullish |
| Bear put spread | Long high-strike put + short low-strike put | Spread width minus net debit | Net debit paid | Moderately bearish |
| Iron condor | Long OTM put + short OTM put + short OTM call + long OTM call | Net credit received | Spread width minus net credit | Range-bound, low volatility |
| Straddle | Long ATM call + long ATM put (same strike) | Unlimited | Total premium paid | Directional move, any direction |
| Covered call | Long stock + short call | Strike minus stock cost plus premium | Stock cost minus premium (substantial) | Slightly bullish, income-focused |
Iron Condor Example
Hypothetical example, for education only.
An iron condor collects a net credit by selling a put spread below the market and a call spread above it. If the underlying stays between the short strikes at expiration, the trader keeps the entire credit.
Example: long the 95 put at $1.00, short the 100 put at $2.50, short the 110 call at $2.00, long the 115 call at $0.75.
- Net credit: -1.00 + 2.50 + 2.00 - 0.75 = $2.75 per share, or $275 per contract.
- Maximum profit: $2.75 per share, achieved when the underlying finishes between 100 and 110.
- Maximum loss: spread width (5.00) minus credit (2.75) = $2.25 per share, or $225 per contract. This is the loss if the underlying moves beyond either outer strike.
- Break-even prices: 100 - 2.75 = 97.25 on the downside; 110 + 2.75 = 112.75 on the upside.
The iron condor preset in the builder above is pre-loaded with exactly these parameters. Run it to see the payoff table and confirm the figures match.
Unbounded Risk
A strategy carries unbounded maximum loss when it includes a short call with no higher-strike long call covering it. Because a stock price can rise without limit, the obligation to deliver shares at a fixed strike price when the underlying is far above it creates a potentially unlimited liability. This is the risk profile of a naked short call.
Similarly, a strategy carries unbounded maximum gain when it includes a long call with no short call at the same or higher strike. A long call alone has theoretically unlimited upside because the underlying price can rise without limit.
The builder flags these conditions explicitly with a warning banner rather than silently computing a very large number. If the builder shows an unbounded warning for a strategy you believe is covered, check that your long and short strikes are entered correctly and that the covering leg has a strike strictly higher than the uncovered leg.
Limitations and Assumptions
- Expiration-date analysis only. Time value, early exercise, and delta effects during the trade's lifetime are not modeled.
- All legs are assumed to expire on the same date and on the same underlying.
- Dividends are not included in the payoff calculation.
- Premiums are fixed at the values entered. Real fill prices depend on bid/ask spreads, liquidity, and market conditions.
- The commissions field reduces the per-share payoff uniformly across all prices, not per-leg or per-exercise.
- American-style early exercise is not modeled; calculations assume European-style settlement at expiration.
Options Payoff FAQs
What is an options payoff diagram?
An options payoff diagram is a chart showing the profit or loss of an options position at expiration for every possible underlying asset price. The horizontal axis shows the underlying price and the vertical axis shows the net profit or loss per share. For a multi-leg strategy, the diagram adds up the payoffs of every individual leg to show the combined result. Payoff diagrams show only expiration-date outcomes and do not reflect time value, early exercise, or dynamic adjustments.
What does maximum loss mean for an options strategy?
Maximum loss for an options strategy is the worst-case profit and loss outcome at expiration, assuming the underlying price moves to the most unfavorable point and the strategy is held to expiration without adjustment. For defined-risk strategies such as vertical spreads and iron condors, maximum loss is a specific dollar amount. For strategies with uncapped downside such as a naked short call, maximum loss is theoretically unlimited because the underlying price can rise indefinitely. This builder explicitly flags unbounded-loss strategies and displays a risk warning.
How is the break-even price calculated?
The break-even price is the underlying asset price at which the strategy produces exactly zero profit or loss at expiration. It is found numerically: the builder evaluates the net payoff across a fine price grid and finds each point where the payoff changes sign, then interpolates to locate the precise crossing. A strategy can have zero, one, or two break-even prices depending on its structure. An iron condor, for example, has two break-even prices symmetrically below and above the short strikes.
What is yield to worst?
Yield to worst (YTW) is the lowest yield an investor can expect from a callable bond, assuming the issuer acts rationally. It is the minimum of the yield to maturity and all the yield-to-call figures for each call date. This question is answered in our Callable Bond Yield Calculator tool.