Option Profit Diagrams at Expiry: Calls, Puts, and Breakeven
How long and short calls and puts pay off at expiry. The kink sits at the strike, and the breakeven is one premium away from it.
A short animated lesson on the profit-and-loss diagrams that options produce at expiry, built for FIN301 Derivatives students at Western Sydney University and for anyone meeting options for the first time.
It draws the four building-block shapes (long call, short call, long put, short put) as profit at expiry against the underlying price. Each shape is a flat segment, where the option expires worthless, joined to a sloped segment where it pays off, with the kink sitting at the strike. A long call has loss limited to the premium and unlimited upside; a short call mirrors it with limited gain and unlimited loss; the puts give the reflected shapes. The breakeven is marked on each, one premium away from the strike.
Pair the video with the Atlas concept page for the formulas, worked examples, common misconceptions, a quick quiz, and citations to Hull.