Education · Understand your trades

Reading a trade: payoff curve, breakevens & POP

Before you approve anything on YOLO, you are shown a complete picture of the trade — not just “buy this.” Learning to read that picture is how you stay in control. Every candidate carries four things: a payoff curve, its breakevens, a probability-of-profit (POP), and the maximum loss and maximum profit. Here is what each one tells you.

The payoff curve

The payoff diagram is the single most useful thing on the screen. It plots your profit or loss (vertical) against the price of the underlying at expiry (horizontal). Reading left to right shows you exactly what happens to your money as the stock moves.

The loss region is shaded — the flat floor on a defined-risk trade is your capped maximum loss. It never drops below that line, no matter how far the market falls.
The profit region shows where, and how much, you gain. On many defined-risk strategies this is capped too.
Where the line crosses zero is a breakeven (see below).

One glance tells you the shape of the bet: where you make money, where you lose it, and that the downside has a floor.

Breakevens

A breakeven is a price of the underlying at which the trade makes exactly nothing — you neither win nor lose. It is where the payoff line crosses zero. A trade can have one or two breakevens depending on its shape.

Breakevens turn a vague feeling (“I think it goes up”) into a concrete test: “Do I believe the stock will be above £103 by expiry?” If you do not believe price can clear the breakeven in the time you have, the trade is not for you — regardless of how good the idea sounds.

Probability of profit (POP)

POP is an estimate, from an options pricing model, of how likely the trade is to finish at a profit — derived from current prices, volatility and time to expiry. A POP of 65% means the model puts roughly a two-in-three chance on the trade being profitable at expiry.

POP is useful, but read it alongside the payoff: a high POP often pairs with a small max-profit and a larger max-loss, and vice versa. A 70% chance to make £30 while risking £100 is a very different bet from a 40% chance to make £200 while risking £50. POP is a probability, not a promise — the other 35% still happens.

Max loss and max profit

These are the two anchors of any defined-risk trade. Max loss is the most the position can ever cost you — your capital at risk, stated in plain English (“The most you can lose: £240”). Max profit is the most it can make. Together they give you the risk/reward of the trade in two numbers, and both are shown before you ever confirm.

Putting it together before you approve

A good habit is to read the trade in this order: (1) max loss — can I afford this worst case? (2) breakevens — do I believe price gets there in time? (3) risk/reward and POP — is the payoff worth the risk? (4) the payoff curve — does the shape match what I actually expect? Only then do you confirm. YOLO never executes on a single tap — reviewing this picture is the first of the two approval steps.

POP, breakevens and payoff values are model estimates based on current prices and assumptions — they can be wrong, and they are not a forecast or a promise of profit. You can lose the full stated maximum on any trade. Never trade with money you cannot afford to lose. See the full Risk Disclosure.