Payoff vs profit graph
In the hands of the put buyer (long put), p T 0 and p 0 or a loss of 3. Therefore p T 0 and p 0 which means profit 3. This the maximum profit that can be generated using this options trading strategy. The short call option will expire worthlessly and the trader will receive the premium, which is equal to (12050) 6,000.
PAYOFF VS PROFIT GRAPH SERIES
How this graph was created: From the release table about national income by type of income, check the two series and click on “Add to Graph.” From the “Edit Graph” panel, add a series by searching for and selecting “GDP deflator,” apply formula a/b, and finally set the index value of 100 to 1954-05. The put seller is short a put and the exercise price (100) is less than the underlying price (105) so we have a state where S T X. Scenario 1: If NIFTY closes at 5100, as expected by the trader, the strategy will generate a profit. Is it because there’s been a particularly risky climate for investment, or is something else afoot? Never have corporate profits outgrown employee compensation so clearly and for so long. The past decade and a half seems to be different, though. Second, the trends of the two series tend to track each other over several decades, reflecting the general growth of the economy.
![payoff vs profit graph payoff vs profit graph](https://media.cheggcdn.com/media/d83/d83a2edc-a25b-45ab-9a26-f066a97d8cf2/phpYbnExa.png)
Employee income is much more stable, but still suffers during recessions. After all, it’s well understood that investing in a business is a risky undertaking that deserves and often acquires compensation. Profits tend to tank during recessions (noted with gray bars), which is understandable.
![payoff vs profit graph payoff vs profit graph](https://i.ytimg.com/vi/xrFlylt5iUA/maxresdefault.jpg)
![payoff vs profit graph payoff vs profit graph](https://ars.els-cdn.com/content/image/3-s2.0-B9780123869685000200-f20-04-9780123869685.jpg)
First, corporate profits move a lot, especially in response to general business activity. (NOTE: The economic impact of the Korean War has essentially vanished.)Įyeballing the data leads to two major conclusions. Both series are adjusted for inflation and both start at the level of 100 in 1954, which is the first year that’s considered “post-war” for economic purposes. This FRED graph shows the evolution of two sources of income in our national economy: the compensation of employees through wages and other salary compensation, and the compensation of capital through profits.