Short Stock Risk Profile
Now you can see what buying a stock looks like, let's look at what "shorting" a stock looks like.
Shorting just means selling something that you don't already own. Shorting is an accepted concept in some stock markets such as the US, but is not currently allowed in some other stock markets such as the UK.
Remember that when you short you can lose an unlimited amount as the asset price rises, and your maximum profit is the shorted price, here, let's say $25.00. In order to make maximum profit from a short stock position, the asset would have to fall to zero.
Short Stock Risk Profile
So, now you know how to draw the most basic risk charts, we can move to options risk profiles...