Profit Range

AAA

DEFINITION of 'Profit Range'

A range of prices that an underlying security can possess in order for an investment strategy to be profitable. For some strategies, the position taken will have two break-even points. The range between these two points serves as the profit range for the strategy.

INVESTOPEDIA EXPLAINS 'Profit Range'

When designing a strategy, the profit range is a useful metric for investors when they compare it to the volatility of the underlying asset. It allows investors to match profit ranges with appropriate volatilities. Large ranges should be used with high volatility assets and vice versa. A mismatch of volatility and profit range tends to lead to a loss on the position.

RELATED TERMS
  1. Profit

    A financial benefit that is realized when the amount of revenue ...
  2. Breakeven Point - BEP

    1. In general, the point at which gains equal losses. 2. In options, ...
  3. Strangle

    An options strategy where the investor holds a position in both ...
  4. Straddle

    An options strategy with which the investor holds a position ...
  5. Moneyness

    A description of a derivative relating its strike price to the ...
  6. Break-Even Analysis

    An analysis to determine the point at which revenue received ...
Related Articles
  1. Tips For Controlling Investment Losses
    Active Trading Fundamentals

    Tips For Controlling Investment Losses

  2. The Stop-Loss Order - Make Sure You ...
    Active Trading Fundamentals

    The Stop-Loss Order - Make Sure You ...

  3. Investing 101: A Tutorial For Beginner ...
    Options & Futures

    Investing 101: A Tutorial For Beginner ...

  4. What Does The Dow Jones Industrial Average ...
    Investing Basics

    What Does The Dow Jones Industrial Average ...

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center