Six miniature options payoff diagrams — long call, short put, iron condor, iron fly, straddle and vertical spread — showing the characteristic shape of each at expiration
Six of the thirty shapes below. Every option structure ever built is some combination of these kinks.

30-Second Summary

A payoff diagram plots what a position is worth at expiration against where the underlying finishes. The horizontal axis is price, the vertical axis is profit and loss, and the flat segments are the parts that matter most — a flat line means the outcome has stopped changing, which is either your max profit or your max loss. Below are all thirty strategies in the library, grouped by the market view they express, each with its max profit and max loss underneath. Click any diagram for the full setup, Greeks, and worked example.

How to Read a Payoff Diagram

Four features carry all the information:

  • The zero line. Where the plotted line crosses it is a breakeven. Two crossings means two breakevens — one on each side — which is the norm for condors, flies, straddles and strangles.
  • Flat segments. A horizontal line is a capped outcome. Flat on the left and sloping up on the right is a long call. Flat in the middle and sloping down on both ends is a short strangle.
  • Kinks. Every bend sits at a strike. Count the kinks and you know how many legs the structure has.
  • The open ends. A line that keeps rising or falling at the edge of the chart means unlimited — no long leg is capping it. That’s the single most important thing to check before opening a position.

One caveat worth stating plainly: these charts show expiration values. A position rarely behaves like its payoff diagram before then, because extrinsic value is still in the price. An iron condor sitting comfortably inside its range three hours before the close is not yet at max profit — theta still has work to do, and gamma can undo it. The diagram is the destination, not the route.

Payoff Diagrams by Market Outlook

Bullish Strategies

Long call payoff diagram at expiration: max loss of $3,600 below the 7,550 strike, breakeven at 7,586, unlimited profit above
Long CallMax profit: Unlimited upside
Max loss: Premium paid ($3,600)
Bull call spread payoff at expiration: max loss -$1,500 below the 7,525 long strike, breakeven 7,540, profit capped at +$3,500 above the 7,575 short strike
Bull Call SpreadMax profit: +$3,500
Max loss: −$1,500 (the debit)
Bull put spread payoff at expiration: max profit +$1,500 above the 7,475 short strike, breakeven 7,460, max loss -$3,500 below the 7,425 long strike
Bull Put SpreadMax profit: +$1,500 (the credit)
Max loss: −$3,500
Cash-secured put payoff diagram at expiration: profit capped at +$700 above the $745 strike, breakeven at $738, assignment losses below
Cash-Secured PutMax profit: +$700 (the premium)
Max loss: Stock to zero
Naked short put payoff at expiration: premium capped at +$500 above the $515 strike, breakeven $510, leveraged loss with no floor below
Short Put (Naked)Max profit: +$500 (the premium)
Max loss: (Strike × 100) − premium
Call back spread payoff: small floor loss below, worst loss $5,500 at the 7,500 long strike, unlimited gain above breakeven 7,555
Call Back SpreadMax profit: Unlimited above 7,555
Max loss: −$5,500 at the long strike
Poor man's covered call payoff: curved, LEAPS floor below, breakeven near 7,475, profit capped near +$4,000 above the 7,600 short call
Poor Man's Covered CallMax profit: ~+$4,000 above 7,600
Max loss: The LEAPS debit
Diagonal spread payoff: curved hump peaking near +$4,300 at the 7,550 short strike, breakeven 7,430 (approximate at short expiry)
Diagonal SpreadMax profit: ~+$4,300 near 7,550
Max loss: The net debit
Call ratio spread payoff: credit floor below, peak profit $5,800 at the 7,550 short strikes, unlimited loss above breakeven 7,608
Call Ratio SpreadMax profit: +$5,800 at 7,550
Max loss: Unlimited above 7,608

Bearish Strategies

Long put payoff diagram at expiration: max loss of $3,600 flat above the 7,450 strike, breakeven at 7,414, profit growing as SPX falls
Long PutMax profit: Large as SPX falls
Max loss: Premium paid ($3,600)
Bear put spread payoff at expiration: max profit +$3,500 below the 7,425 short strike, breakeven 7,460, max loss -$1,500 above the 7,475 long strike
Bear Put SpreadMax profit: +$3,500
Max loss: −$1,500 (the debit)
Bear call spread payoff at expiration: max profit +$1,500 below the 7,550 short strike, breakeven 7,565, max loss -$3,500 above the 7,600 long strike
Bear Call SpreadMax profit: +$1,500 (the credit)
Max loss: −$3,500
Naked short call payoff: flat max profit $2,150 below the 7,600 strike, unlimited loss above breakeven 7,621
Naked Short CallMax profit: +$2,150 (the premium)
Max loss: Unlimited

Neutral & Range-Bound Strategies

Iron condor payoff: max profit $1,700 between 7,450 and 7,550, max loss $3,300 beyond the long strikes, breakevens 7,433 and 7,567
Iron CondorMax profit: +$1,700 (the credit)
Max loss: −$3,300
Iron butterfly payoff: tent peaking at +$5,000 at the 5,200 strike, max loss $5,000 beyond the wings, breakevens 5,150 and 5,250
Iron ButterflyMax profit: +$5,000 at the body
Max loss: −$5,000 past the wings
Short straddle payoff: inverted V, max profit $7,200 at the 7,500 strike, unlimited loss beyond breakevens 7,428 and 7,572
Short StraddleMax profit: +$7,200 at 7,500
Max loss: Unlimited
Short strangle payoff: flat max profit $4,300 between the strikes, unlimited loss beyond breakevens 7,407 and 7,593
Short StrangleMax profit: +$4,300 between strikes
Max loss: Unlimited both sides
Jade lizard payoff: loss only below breakeven 7,395, flat +$5,500 through the middle, still-positive +$500 above the call spread (no upside risk)
Jade LizardMax profit: +$5,500 (no upside risk)
Max loss: Downside only, below 7,395
Long butterfly payoff: tent peaking at +$3,800 at the 7,500 body, max loss $1,200 beyond the wings, breakevens 7,462 and 7,538
Long ButterflyMax profit: +$3,800 at the body
Max loss: −$1,200 (the debit)
Long calendar spread payoff: curved hill peaking near +$2,850 at the 7,500 strike, losses as price moves away (approximate)
Long Calendar SpreadMax profit: ~+$2,850 at 7,500
Max loss: The net debit

Big-Move & Long-Volatility Strategies

Long straddle payoff: V-shaped, max loss $5,000 at the 7,500 strike, profit beyond breakevens 7,450 and 7,550
Long StraddleMax profit: Unlimited on a big move
Max loss: −$5,000 at the strike
Long strangle payoff: flat max loss $4,300 between the 7,450 and 7,550 strikes, profit beyond breakevens 7,407 and 7,593
Long StrangleMax profit: Unlimited on a big move
Max loss: −$4,300 between strikes
Long iron condor payoff: max loss $1,700 between the short strikes, max profit $3,300 on the wings, breakevens 7,433 and 7,567
Long Iron CondorMax profit: +$3,300 on the wings
Max loss: −$1,700 (the debit)
Long iron butterfly payoff: max loss $5,000 at the 5,200 body, max profit $5,000 on the wings, breakevens 5,150 and 5,250
Long Iron ButterflyMax profit: +$5,000 on the wings
Max loss: −$5,000 at the body
Short butterfly payoff: valley with max loss $3,800 at the 7,500 body, max profit $1,200 beyond the wings, breakevens 7,462 and 7,538
Short ButterflyMax profit: +$1,200 past the wings
Max loss: −$3,800 at the body
Short calendar spread payoff: curved valley with max loss near -$2,850 at the 7,500 strike, profit as price moves away (approximate)
Short Calendar SpreadMax profit: ~+$2,850 on a big move
Max loss: ~−$2,850 at the strike

Hedges & Stock-Based Strategies

Protective put payoff diagram at expiration: loss floored at -$1,700 below the $740 strike, breakeven at $757, unlimited upside above
Protective PutMax profit: Unlimited (stock upside)
Max loss: −$1,700 floor
Collar payoff at expiration: loss floored at -$1,000 below the $510 put, breakeven $520, profit capped at +$1,000 above the $530 call
CollarMax profit: +$1,000 (capped)
Max loss: −$1,000 (floored)
Covered call payoff diagram at expiration: loss below breakeven $743, profit capped at +$1,700 once SPY reaches the $760 strike
Covered CallMax profit: +$1,700 (capped)
Max loss: Stock to zero, less premium
The Wheel cycle: Phase 1 sell a cash-secured put, Phase 2 get assigned 100 shares, Phase 3 sell a covered call, Phase 4 get called away back to cash, then repeat
The WheelA cycle diagram, not an expiration payoff — the wheel is a sequence of four positions, each with its own chart above.

The Five Shapes Everything Else Is Built From

Thirty diagrams look like thirty ideas. They’re closer to five, recombined:

ShapeWhat it meansExamples
Hockey stickOne capped side, one open sideLong call, long put, naked short call
TentPeak profit at a center strike, falling both waysIron butterfly, long butterfly
PlateauFlat max profit across a range, falling outside itIron condor, short strangle
ValleyWorst outcome in the middle, better at the edgesLong straddle, short butterfly, long iron condor
Floor-and-ceilingBoth ends cappedCollar, vertical spreads

Notice that every “tent” has an inverted twin that is somebody’s “valley.” A short iron butterfly and a long iron butterfly are the same four strikes viewed from opposite sides of the trade — one seller, one buyer, one chart flipped. That symmetry is the clearest argument that options are a transfer, not a machine: your max profit is the other side’s max loss, to the dollar.

Which Shape Do Premium Sellers Want?

The plateau. A seller’s ideal diagram is flat and positive across the widest possible range of outcomes, sloping down only where the market is unlikely to go — that’s the iron condor , the short strangle , and the credit spreads. The trade is deliberately unglamorous: a modest, capped gain that happens most of the time, against a larger loss that happens occasionally.

Buyers want the opposite shape. A valley or a hockey stick — small, known cost most days, in exchange for the rare session that pays multiples. Both sides can be right over a long enough sample; they’re simply being paid in different distributions. What the diagrams make impossible to hide is the trade-off. There is no shape with a wide flat profit and no downside anywhere, and every structure that looks like one has the risk hidden off the edge of the chart.

Frequently Asked Questions

What is a payoff diagram in options?

A payoff diagram is a chart of a position’s profit or loss at expiration, plotted against the underlying’s price. The horizontal axis is the underlying price, the vertical axis is dollars gained or lost, and the shape of the line encodes the strategy’s max profit, max loss, and breakeven points in one picture.

How do you read an options payoff chart?

Find where the line crosses zero — those are the breakevens. Flat segments are capped outcomes (max profit or max loss). Bends occur at strike prices. If either end of the line keeps rising or falling off the chart, that side of the position has unlimited risk or unlimited profit.

Do payoff diagrams show the position before expiration?

No. A standard payoff diagram is the expiration value only. Before expiry, a position sits above or below its expiration line because extrinsic value is still priced in. That gap is exactly what theta decay closes, which is why a short position converges toward its payoff diagram as the final hours pass.

Why do payoff diagrams bend at strike prices?

Because that’s where an option’s behavior changes. Below its strike a call contributes nothing to the payoff; above it, the call gains a dollar for every dollar the underlying rises. That switch produces a kink. One kink per strike, which is why a four-leg iron condor has four of them.

This content is for educational purposes only. Options trading involves significant risk of loss. Always trade within your risk tolerance.