This free Option Profit/Loss Graph Maker allows the user to combine up to ten different types of options as well as the underlying stock to determine what the profit or loss would be. It will also create a chart in Excel to visually see what the profit or loss would be as the spot price of the underlying asset changes. There are a number of pre-loaded option strategies in this Excel workbook. To use these, macros must be enabled. By clicking the buttons next to the graph, the trading strategies that come pre-loaded in this workbook will load. The option strategies that are pre-loaded into this workbook include:
  • Synthetic Positions
    • Synthetic Long Stock
    • Synthetic Short Stock
    • Synthetic Long Call/Protective Put
    • Synthetic Short Call
    • Synthetic Long Put
    • Synthetic Short Put/Covered Call
  • Directional Strategies
    • Collar
    • Bull Call Spread
    • Bear Call Spread
    • Bull Put Spread
    • Bear Put Spread
  • Non-Directional Strategies
    • Long Straddle
    • Long Strangle
    • Long Call Butterfly
    • Short Call Butterfly
    • Long Put Butterfly
    • Short Put Butterfly
    • Iron Butterfly
    • Reverse Iron Butterfly
    • Iron Condor
    • Jade Lizard
    • Long Guts
Buttons have been created for each of these trading positions. Upon clicking the button, the workbook will load a basic version of the position and show the option profit/loss graph. Rather than using pre-loaded strategies, the user can also manually enter their own inputs. Inputs can be entered into the greyed out boxes within the table below the graph. This workbook allows the user to:
  • Change the Current Stock Price
  • Combine up to Ten Different Options
  • Choose whether to Long or Short the Stock or Options
  • Choose the Strike Price of Each Option
  • Choose the Premium Being Charged
  • Choose the Quantity of Each Option or Stock Being Purchased or Sold

Synthetic Positions

A synthetic position is a portfolio or trading position that holds a number of securities that when taken in aggregate, emulate another position. For example, a synthetic long call position can be created by combining the underlying asset and a long position on the put option. Synthetic positions are generally created to alter an existing trading position, reduce transactions necessary to change a position, or to identify mispricing in the market.

Directional Strategies

Directional trading strategies try to bet on the upwards or downwards movement of the market. For example, a bull call spread is used when investors think the underlying asset will increase in price. This position is created by buying a call option with a lower strike price and selling a call option with a higher strike price. The short call will cover part of the cost of the premium, however, it will also cap the potential upside from the call option. An example of a bull call spread is pre-loaded into this option profit/loss graph. These strategies are employed when a trader believes that they can predict how the market will move.

Non-Directional Strategies

Non-directional trading strategies try to bet on the volatility of the underlying asset rather than a specific upwards or downwards movement. For example, a straddle is created by buying an at-the-money call option and an at-the-money put option. The trader will start with a net credit from paying the premiums, however, a movement upwards or downwards can result in a profit. An example of a straddle is pre-loaded into this option profit/loss graph. Non-directional trading strategies are employed when a trader believes that there is either high or low volatility, but they do not know whether the underlying asset will increase in a decrease in price. There are however some non-directional strategies that still consider direction. For example, a jade lizard strategy is created by selling an out-of-the-money put option and selling an out-of-the-money bear call spread. This profits from low volatility, however is also slightly bullish since it aims to reduce the upside risk.
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