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. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  2. Profit

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

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

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

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

    A description of a derivative relating its strike price to the ...
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. How To Invest In The Nikkei 225
    Mutual Funds & ETFs

    How To Invest In The Nikkei 225

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center