This Microsoft Excel spreadsheet is intended to illustrate payoff and profit diagrams for option contracts. The user can specify up to four positions long or short in various instruments. The available instruments are stocks, riskfree bonds, puts, and calls. With puts and calls, the user specifies the strike price. With bonds, the face value must be given by the user. This file is intended for use only by students enrolled in Finance courses at the Robinson College of Business at Georgia State University.

However, if you would like to use this file in another setting, please contact the author of the spreadsheet Jason Greene for permission. Download Instructions Click here to download the Microsoft Excel spreadsheet.

bankrate-logo

If a box appears asking for a username and password, click "Cancel" and the file should open. You should save the spreadsheet on your local disk in order to access it in the future. Spreadsheet Instructions The spreadsheet allows you to specify a strategy with up to four positions in stocks, bonds, puts, or calls. The first worksheet in the Excel spreadsheet file is named "Payoffs" and demonstrates payoff diagrams only. The second worksheet is named "Profits" and demonstrates both payoff and profit diagrams.

Select the Graph type First select the graph type using the pop-up menu under the word "Graph" located low to mid-left side of the spreadsheet. Choosing Payoff A will graph only the payoff diagram for position A in blue on the graph. Choosing Payoff All will graph all positions on the graph at the same time.

Choosing Payoff Combined will only graph the payoff diagram on the combined strategy of positions A through D. Similar graph types are available on the "Profits" worksheet. There are four possible positions A through D and the position color will correspond to the color of the curve on the graph. For example, the first instrument A is blue, so its payoff diagram on the graph will be blue.

For "Profits" worksheet, the payoff diagram curves on the graph are thicker than the profit diagram curves, but are the same color. Select each position To graph the payoff or profit diagrams, you must specify a position in at least one instrument. Choose the instrument you want from one of the four pop-up menus under the "Instrument" column. For options, the Short position is when you "write" an option. For bonds, the Short position is equivalent to borrowing money i.

The diagram represented on the graph shows the payoff or profit at expiration or time of exercise for the options contracts. Each position is for one share of stock, an option on one share of stock, or one bond with the given face value. So, if you want a position of two of the same call options, for example, then you must specify identical call options for two separate positions e.

To cancel a position, set the pop-up menu for the "Instrument" to blank the first pop-up menu choice. For example, setting all four positions A-D to a blank instrument gives you a blank graph.

Black Scholes Option Calculator

Using a graph setting of Payoff All and setting instruments C and D to blank will only show positions A and B on the graph assuming A and B are set to Call , Put , Stock , or Bond. The option premium for a Call or Put position will appear when the position is selected.

The present value or price of the Bond will appear when the position is selected. All prices are rounded to the nearest 10 cents. Set the graph type to Payoff All to show both payoff diagrams from each position on the same graph. Or, set the graph type to Payoff Combined to see only the payoff diagram of the strategy as a whole.

Jason Greene Associate Professor of Finance Robinson College of Business Phone: