The easiest way to learn options is with pictures so that you can begin to piece together strategies step-by-step. However, first we need to understand the four basic strategies. From that point, logic kicks in, and our learning can progress exponentially.
A risk profile chart shows us our profit/loss position for each trade. It differs from a standard price/time chart that we're used to seeing to monitor stock prices.
There are four easy steps to creating a risk profile chart:
Step 1. Y axis for profit/loss position
Step 2. X axis for underlying asset price range
Step 3. Breakeven ...