Cheat Sheet No. 31
Hockey Sticks
Visualize the possible gain or loss from any options trade
Simple graphical representations called hockey sticks show the potential profit and loss of any options trade. The name comes from the shape.
Imagery aside, keep in mind that options have a limited lifespan and expiration date. Volatility and time until expiration can change the pricing and profit or loss before expiration. The horizontal axis shows the potential stock price, while the vertical axis represents profit and loss. Remember that options control 100 shares, so options prices can be shown per share or per 100 shares.
Consider a few simple examples of how investors might use options to create a bullish position in Alphabet (GOOGL).
Long...
