Calculate options profit with payoff diagram
Options give the right (but not obligation) to buy (call) or sell (put) an asset at the strike price. Buyers pay a premium; sellers collect it.
Buying a call profits when the price rises above strike + premium. Buying a put profits when the price falls below strike - premium. Max loss for buyers is limited to the premium paid.
Selling options has limited profit (the premium) but potentially unlimited loss. The payoff diagram visualizes profit/loss across different expiration prices.
