Model and input conventions
Strikes must increase in the order long put, short put, short call, long call. Add the two purchased option payoffs and subtract the two sold payoffs. Signed premium paid subtracts short receipts from long payments, and a credit therefore appears as a negative payment. Multiply the complete four-leg package by underlying quantity, then subtract total fixed costs. All options use a common expiry and quote convention.
Worked numerical example
Use strikes 80, 90, 110 and 125 with premiums paid of 1 on each outer wing and receipts of 4 and 5 on the inner legs. The credit is 7. With one package and no fees, the best expiry P&L is +7 between 90 and 110. Below 80 the loss is 3, while above 125 it is 8 because the call wing spans fifteen points rather than ten. Break-even prices are 83 and 117.
Read the scenario table
Read both tails of the scenario table, especially when wing widths differ. A symmetrical-looking range of short strikes does not imply symmetrical losses. The selected terminal-price metric is only one point on the payoff function; exact best and worst values also inspect strike boundaries. For practical comparisons, enter total package costs rather than accidentally deducting a four-leg commission once for each underlying unit.
Where the model stops
This is the short-inner, long-outer direction; reversing every leg creates a different strategy. It assumes all legs remain present until European-style cash settlement and excludes early assignment, margin liquidation and partial fills. The initial receipt does not represent a yield on capital because required collateral is not modeled. Extreme entered fees or unusual premiums may remove one or both normal break-even boundaries.