Strategy builder and P&L heat map
Build an options position of up to eight legs and see its net credit or debit, entry cost, max risk and return, breakevens, payoff at expiry and a projected P&L heat map by price and date.
Overview
The Strategy builder and P&L heat map models a position made of one to eight option legs: verticals, iron condors, butterflies, straddles, calendars, diagonals or any custom combination. From the strikes, expirations, contracts and entry premiums you type, it shows what the position collects or costs on entry, its profit and loss across underlying prices at expiry, and a heat map of its projected value on every date between today and the last expiration.
Use it to understand the shape of a position before you research it further: where it makes and loses money, how wide the profitable range is and how time and volatility change its value.
The builder works only on the premiums and implied volatilities you enter; when you copy them from a screen, that data's delay depends on your plan and is shown on every view. Every figure is a theoretical model projection, an estimate, and the page says so ("Model projection from the entered premiums and IVs; not a quote and not investment advice").
Before you start
- The strategy builder is a Pro feature. On another plan, Analyze returns a plan message instead of results.
- Have each leg's strike, expiration and premium per share ready, for example from the Options screener or one of the spread reports such as Credit and debit spreads.
- Know the difference between buying (long) and selling (short) an option. The Metric glossary covers the terms.
Steps
- Open Research → Tools and click Strategy builder and P&L heat map. The Legs table opens with an iron condor around a price of 100, expiring on a Friday about five weeks out.
- Edit the legs. For each row choose Side (Buy or Sell) and Type (Call or Put), then fill Strike, Expiration, Contracts (a whole number, at least 1), Entry premium (per share) and IV %.
- Use Add leg for more rows (up to 8) and the bin icon to remove one. Iron condor template resets the table to the starting iron condor.
- Set Risk-free rate % (default
4.5). Optionally set Price from, Price to and Step for the heat map rows; leave them on auto to let the tool choose. - Press Analyze.
Inputs and outputs
| Input | Meaning |
|---|---|
| Side | Buy = long the option (you pay the premium); Sell = short the option (you receive it). |
| Type | Call or put. |
| Strike | Exercise price of the leg. |
| Expiration | Expiration date of the leg. Legs may expire on different dates (calendars and diagonals). |
| Contracts | Number of contracts; each contract is 100 shares. |
| Entry premium | Premium per share paid (buy) or received (sell). |
| IV % | Implied volatility used to value this leg on the heat map before it expires (default 30). |
| Risk-free rate % | Rate used by the Black-Scholes valuation on the heat map. |
| Price from, Price to, Step | Optional underlying price range and spacing for the heat map rows. |
| Output | What it means / formula |
|---|---|
| Net credit (per share) / Net debit (per share) | Sum of (contracts x premium) over sold legs minus the same over bought legs. Positive = credit, otherwise debit. |
| Entry cost | Cash at entry for the whole position: sum of (+1 for buy, -1 for sell) x contracts x premium x 100. Negative is a credit received, positive a debit paid. |
| Max risk (at expiry) | The largest loss on the payoff-at-expiry curve, as a positive amount (0 if the curve never goes below zero). |
| Max return (at expiry) | The largest profit on the payoff-at-expiry curve. |
| Breakevens | Underlying prices where the payoff at expiry crosses zero (interpolated between evaluated prices). |
| Payoff at expiry | Chart of the whole position's P&L (contracts x 100) at each underlying price, with every leg at intrinsic value: max(price - strike, 0) for calls, max(strike - price, 0) for puts, minus the entry premium. Prices evaluated run from half the lowest strike to 1.5 times the highest. |
| Projected P&L heat map | Rows = underlying price (high to low), columns = valuation date. Each cell = sum over legs of (+1 buy / -1 sell) x contracts x (leg value - entry premium) x 100. A leg is valued with Black-Scholes using its IV % before its expiration and at intrinsic value on or after it. The header states the worst and best cell. |
Heat map defaults: prices from 80 % of the lowest strike to 120 % of the highest in about 40 steps (at most 120 rows); dates from today (New York time) to the last leg's expiration, thinned to at most 60 columns, never more than one year. Cells are shaded red for losses and green for profits, deeper toward the worst and best cell; hover a cell to see its price, date and exact amount.
How to read it
- Credit or debit first. A credit position (most iron condors, credit spreads) starts with cash received and profits if the options lose value; a debit position starts with cash paid and needs the options to gain value.
- Max risk versus max return frames the trade-off at expiry. Their ratio and the distance from the current price to each breakeven describe how the position is shaped, not how likely either outcome is.
- The heat map shows the path, not just the end. The last column is expiry; earlier columns include remaining time value. For a short-premium position, cells near the short strikes typically move toward the max return as the columns approach expiry, which is time decay at work.
- Calendars and diagonals: the payoff-at-expiry chart and the four tiles value every leg at intrinsic value, whatever its own expiration date, so they ignore the time value left in the longer-dated leg. Read the heat map column on the near expiration instead.
- Max risk and return are measured on the evaluated price range. A position with unlimited risk (for example an uncovered short call) shows the loss at the top of the range, not "unlimited".
Example
Illustrative only, for the invented symbol XYZ trading near 100. This is the starting Iron condor template, one contract per leg:
| Leg | Side | Type | Strike | Entry premium |
|---|---|---|---|---|
| 1 | Buy | Put | 90 | 0.50 |
| 2 | Sell | Put | 95 | 1.20 |
| 3 | Sell | Call | 105 | 1.10 |
| 4 | Buy | Call | 110 | 0.40 |
- Net credit (per share): 1.20 + 1.10 - 0.50 - 0.40 = $1.40.
- Entry cost: -$140.00, credit received.
- Max return (at expiry): $140.00, when
XYZends between 95 and 105 and every option expires worthless. - Max risk (at expiry): $360.00, the 5-point wing width minus the 1.40 credit, times 100.
- Breakevens:
93.60 / 106.40(95 - 1.40 and 105 + 1.40). - Heat map: the cell at price
100.00in the last column (expiry) is140; earlier columns at the same price show less, because the short options still hold time value.
Using it in your research
- How wide is the range between the breakevens compared with how far the underlying has moved recently? Compare with Technical indicators and trend analysis.
- How does the position's value change over time if the price stays put? Read one heat map row from left to right.
- How sensitive is the projection to volatility? Re-run with a higher or lower IV % on each leg and compare the heat maps.
- What changes if you widen the wings or add contracts? Edit one leg at a time and compare max risk, max return and breakevens.
- For a spread found in Credit and debit spreads, or a combination from Straddles or Strangles, what does the full P&L surface look like?
FAQs
Does the builder use live option prices?
No. It uses the premiums and IVs you type. Copy them from a screen and remember their delay.
Can I change the contract multiplier or dividend yield?
Not on the page. Every leg uses 100 shares per contract and a dividend yield of 0.
Why does the heat map have fewer date columns than days to expiry?
Long date ranges are thinned to at most 60 columns, always keeping the first and the last date.
Troubleshooting
"Leg 2: enter the entry premium per share" (or strike, expiration, contracts, IV)
That leg has a missing or invalid value. Contracts must be a whole number of at least 1; premium and IV cannot be negative; expiration must be a date.
The page shows a plan message after Analyze
The strategy builder needs the Pro plan. See your plan under Account → Billing.
Max risk looks too small for a position with a short call
Max risk is the worst value on the evaluated price range (up to 1.5 times the highest strike). Uncovered short calls have no upper bound on loss; the tile does not show that.
The breakevens look wrong for my calendar spread
The tiles value every leg at intrinsic value. Use the heat map column on the near-term expiration to see breakevens that include the longer leg's remaining time value.