34 Part I: Basic Properties of Stock Options 
option continues to decline through 2 - 1.90, 1.80, 1.70, and so on - without ~ 
ever regaining the 2 level, then the broker's hands are tied. He may not execute 
what is now a limit order unless the call trades at 2. 
Good-Until-Canceled Order. A limit, stop, or stop-limit order may be des­
ignated "good until canceled." If the conditions for the order execution do not 
occur, the order remains valid for 6 months without renewal by the customer. 
Customers using an on-line broker will not be able to enter "market not held" 
orders, and may not be able to use stop orders or good-until-canceled orders either, 
depending on the brokerage firm. 
PROFITS AND PROFIT GRAPHS 
A visual presentation of the profit potential of any position is important to the over­
all understanding and evaluation of it. In option trading, the many multi-security 
positions especially warrant strict analysis: stock versus options (as in covered or ratio 
writing) or options versus options (as in spreads). Some strategists prefer a table list­
ing the outcomes of a particular strategy for the stock at various prices; others think 
the strategy is more clearly demonstrated by a graph. In the rest of the text, both a 
table and a graph will be presented for each new strategy discussed. 
Example: A customer wishes to evaluate the purchase of a call option. The potential 
profits or losses of a purchase of an XYZ July 50 call at 4 can be arrayed in either a 
table or a graph of outcomes at expiration. Both Table 1-5 and Figure 1-5 depict the 
same information; the graph is merely the line representing the column marked 
"Profit or Loss" in the table. The vertical axis represents dollars of profit or loss, and 
the horizontal axis shows the stock price at expiration. In this case, the dollars of prof­
it and the stock price are at the expiration date. Often, the strategist wants to deter­
mine what the potential profits and losses will be before expiration, rather than at the 
expiration date itself. Tables and graphs lend themselves well to the necessary analy­
sis, as will be seen in detail in various places later on. 
In practice, such an example is too simple to require a table or a graph - cer­
tainly not both - to evaluate the potential profits and losses of a simple call purchase 
held to expiration. However, as more complex strategies are discussed, these tools 
become ever more useful for quickly determining such things as when a position 
makes money and when it loses, or how fast one's risk increases at certain stock 
prices.