Option Payoff Diagrams: Long and Short Calls and Puts

Before you read: Option Premium: Intrinsic Value, Time Value and Moneyness

What you will learn

• How to read a payoff diagram at expiration.
• The shapes of the four basic positions and where each one breaks even.
• Why a payoff diagram at expiration is not the same as the value of the position before expiration.

What does a payoff diagram show?

If you could see every possible price at expiration at once, what would your result be at each one?

A payoff diagram plots the result of a position at expiration on the vertical axis against the underlying’s price at expiration on the horizontal axis. It includes the premium paid or received, so it shows profit or loss rather than just the option’s value. It ignores fees unless you add them. It answers one narrow question: “If the underlying finishes at this price, what is my result?”

The examples below use a fictional stock, a $100 strike, a premium of $3 and the standard 100-share multiplier.

What do the four basic shapes look like?

Which positions have a floor under the loss, and which do not?

Long call. Below $100 the call expires worthless and the loss is the $3 premium, $300 per contract. Above $100 the result improves $1 for every $1 rise. Breakeven is strike + premium = $103. The maximum loss is the premium; the gain has no fixed limit.

Short call. The mirror image. The seller keeps the $300 if the stock finishes at or below $100. Above $103 the seller loses $100 per contract for every $1 rise, with no fixed limit.

Long put. Above $100 the put expires worthless and the loss is the $300 premium. Below $100 the result improves $1 per $1 fall. Breakeven is strike − premium = $97. The maximum gain is reached if the stock goes to zero: ($100 − $3) × 100 = $9,700.

Short put. The mirror image of the long put. The seller keeps $300 at or above $100, breaks even at $97 and loses up to $9,700 per contract if the stock goes to zero.

Strike and premium are per share; the dollar limits are per contract. With the $3 premium and a 100-share multiplier, the long call’s or long put’s maximum loss is $300.

Payoff diagram

Illustrative diagram constructed for teaching. Not real market data.

The diagram plots the expiration result for a long $100 call and a long $100 put, each bought for a fictional $3 premium, with the breakeven prices of $103 and $97 marked. It is constructed for teaching and is not real market data.

How do combined positions work?

What happens if you hold more than one option at the same time?

The payoff of a combined position is the sum of the payoffs of its parts at each price. A vertical spread, for example, buys one option and sells another of the same type and expiration at a different strike. The sold option lowers the net premium but also caps the gain, and the bought option limits the loss. Adding the lines strike by strike shows the combined shape. The options payoff calculator on our Tools page does this arithmetic for single options and two-leg vertical spreads, so you can see the shape without drawing it by hand.

Why is expiration only part of the picture?

Will an option position always show the result from the diagram if you close it early?

No. Before expiration, each option still has time value, so the position’s current value curves smoothly around the expiration lines rather than bending sharply at the strike. Changes in implied volatility and the passing of time move that curve from day to day. The expiration diagram is the endpoint, not the path. A position can show a loss along the way even if it would finish with a gain at a given price, and the reverse.

What this does not tell you about payoffs

• A payoff diagram shows possible outcomes, not likely ones. It says nothing about which price the underlying will reach.
• American-style short options can be assigned before expiration, which can change the result. See Exercise, Assignment and Settlement.
• Fees, bid/ask spreads and margin requirements are not in the basic diagram.
• Unlimited-loss positions remain risky even when the diagram looks favorable over a narrow range.

Check yourself

1. A long $50 put costs $2. What is the breakeven at expiration, and what is the most that can be lost per contract? Hint: strike minus premium; premium × 100.
2. Why does a short call have “no fixed limit” in the maximum-loss column? Hint: how far can the underlying rise?
3. A position’s expiration diagram shows a gain at the current price, but the position shows a loss today. How can both be true? Hint: time value and volatility before expiration.

Last reviewed November 8, 2026. Spotted a mistake? Report an error.