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Intermediate · Lesson 3 of 6

Payoff diagrams and breakeven

7 minute read · By Krishna Avadhani, Vestora Academy · Updated 18 October 2026

A payoff diagram shows profit or loss at expiry for each possible share price. For a long call: loss of the premium below the strike, breakeven at strike + premium, profit rising one-for-one above that.

For a long put: breakeven at strike - premium, with profit growing as the price falls towards zero. The most a put can make is strike - premium (if the share goes to zero).

Always work out three numbers before any option trade: maximum loss, maximum gain and breakeven. Vestora's options simulator draws these for each strategy.

Key takeaways

  • Long call breakeven = strike + premium.
  • Long put breakeven = strike - premium.
  • Know max loss, max gain and breakeven before trading.

Check your understanding

1. Buy a $40 call for $2. Breakeven at expiry?

  • $38
  • $40
  • $42
  • $44
Show the answer

$42. 40 + 2 = $42.

2. Buy a $30 put for $1.50. Maximum profit if the share goes to zero?

  • $1.50
  • $28.50
  • $30
  • Unlimited
Show the answer

$28.50. 30 - 1.50 = $28.50 per share.

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General education only, not financial advice. Examples are illustrations. Rules, tax settings and products change; check official sources.