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Step 4 Calculate the profit or loss. Page 23 For an option that was initially purchased, profit or loss is calculated by subtracting the purchase price from the value at expiration.

For the purpose of drawing diagrams it is assumed that a purchased option is sold at its value at expiration. Sixth, repeat steps 3 through 5 until the profit and loss diagram is complete.

Although 22 strategies were presented in this chapter, there are many more possibilities. Option strategies are limited only by one's imagination.

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