A payoff profile:
A)determines the price of an option contract.
B)determines whether a forward or a futures contract is needed.
C)applies only to contract sellers.
D)determines the price of a collar.
E)illustrates potential gains and losses.

Question

Quizplus · Accepted Answer

A payoff profile illustrates the potential gains and losses of an investment or trading strategy. It is commonly used in options trading to visualize the profit or loss that can be expected at different prices of the underlying asset. It is not specific to contract sellers, and does not determine the price of an option contract, forward or futures contract, or collar.

A Payoff Profile