18Jan
Can you explain the concept of a one-standard-deviation stock price change and its relevance to options trading?
QUESTION:
How would you create a profit/loss diagram for an option strategy?
ANSWER:
A profit/loss diagram is an essential tool for traders new to options, because it helps a trader graphically understand a strategy. A profit/loss diagram tells you the most you can make, the most you have at risk and where the strategy will break even at expiration. To learn how you can create a profit/loss diagram step-by-step, view this week’s segment of “Ask the Institute.”
— CBOE
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