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The 3 Big Reasons Why Your Option Strategy Payoff Diagram Is Different Today - Show#080

1,438 views · Published 26 January 2017 · 16:01 · Indexed 29 October 2026

Channel: Option Alpha · 2017 · Howto & Style

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http://optionalpha.com/show80 - Your option strategy payoff diagram is an ever evolving and changing animal. Unlike stocks which have one-dimensional payoff graphs, either upward or downward sloping, and theoretically unlimited holding periods, option strategies are impacted by cubic pricing events. Namely, time decay (Theta), implied volatility (Vega) and interest rates (Rho) which can cause your payoff diagram to shift, mold, and bend as these additional pricing elements change with the market.

In today's podcast, I want to help you understand how these three Option Greeks could have a significant impact on the way your payoff diagram looks now vs. at options expiration. In the end, I think it'll help give you more confidence and patience if you understand how option pricing works when holding positions that initially move against you but ultimately will turn out to be profitable.

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