Strategies & lab

The lab focuses on defined-risk option structures where payoff at expiry can be written in closed form, so you can see how credit, strikes, and spot at settlement interact without mixing in execution noise.

Notation

P/L is expressed in per-share option notation for a one-lot mental model. Multiply by contract size (100 shares for standard U.S. equity options) when you think in dollars per contract. All formulas below are from the seller’s perspective when the strategy name says “short” (collect premium, carry risk to expiry).

Short call credit spread (bearish)

Structure: long a lower-strike call, short a higher-strike call, net credit positive. P/L to the seller at expiry (per share) is:

P/L = netCredit
         + max(0, S − K_long)
         − max(0, S − K_short)

K_long < K_short. The spread caps loss when the underlying runs away to the call side: worst case (ignoring early exercise nuance) is when S is very high and you pay the width minus the credit. The chart in the app sweeps S so you can read breakeven and max profit/loss regions directly.

Short iron condor

Two credit spreads: a put side and a call side, same expiry. With strikes ordered K_long_put < K_short_put < K_short_call < K_long_call, P/L to the short condor (seller of both credit spreads) at expiry is:

putWing  = max(0, K_short_put  − S) − max(0, K_long_put  − S)
callWing = max(0, S − K_short_call) − max(0, S − K_long_call)
P/L = netCredit − putWing − callWing

You are paid upfront (netCredit); the profile is flat in the “middle” and loses if spot finishes beyond either short strike by enough to eat the credit. The lab shows the same sweep against spot you use to compare structures side by side.

What this does not do

These are expiry payoffs. They do not model pin risk, early assignment, borrow, or multi-leg margin as your broker posts it. Combine them with the Engine B greeks panels when you care about mark-to-market and time decay before expiry, not just settlement shape.