The payoff shape is many small losses and occasional large wins. Long-premium traders lose on most days and need the wins to be big enough to matter, which makes patience and sizing the entire game.
Example: buy 30-day XYZ $50 calls at $1.15 each, ten contracts, $1,150 risked. In a flat month you lose all of it. If XYZ jumps to $58 in a week the calls might be worth $8.30, or $8,300. One trade like that pays for seven complete losses.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.Long straddle: payoff at expiry. A 100 call and a 100 put bought together for 8 make a V. A quiet market that ends near 100 costs the whole 8; the position only turns positive once the price finishes below 92 or above 108, whichever way it goes.
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