Getting Started with PayoffLab

Welcome to PayoffLab! This guide will help you design your first structured product using our visual payoff designer and AI-powered strategy generation engine.

Account Setup

Creating Your Account

1. Sign Up: Visit https://app.payofflab.com and click “Try PayoffLab Free”
2. Choose Your Plan: Start with our free trial or select a subscription
3. Verify Email: Check your inbox and click the verification link
4. Complete Profile: Add your professional background and trading experience

First Login

After verification, you’ll be guided through our structured products onboarding:

• Welcome Tour: Interactive guide to the payoff designer
• Sample Strategies: Pre-built examples to explore immediately
• Your First Payoff: Draw a simple profit diagram
• AI Strategy Generation: See how our engine finds optimal implementations

PayoffLab Interface Overview

Main Navigation

The PayoffLab workspace is organized into four key areas:

• Designer: Visual payoff diagram creation tool
• Strategies: AI-generated derivative combinations
• Library: Save, organize, and share your strategies
• Chat: Interactive AI assistant for learning and analysis

The Payoff Designer

Your main workspace for creating structured products:

1. Drawing Canvas: Visual grid for drawing profit/loss diagrams
2. Tool Palette: Drawing tools (pencil, line, curve, shapes)
3. Parameter Panel: Adjust underlying price range and time to expiration
4. Strategy Results: Real-time AI suggestions as you draw

Creating Your First Payoff Diagram

Step 1: Choose Your Market View

Before drawing, clarify your investment thesis:

• Bullish: Expecting price increases
• Bearish: Expecting price decreases
• Neutral: Expecting sideways movement
• Volatile: Expecting large moves (direction unknown)

Step 2: Draw Your Desired Payoff

1. Select the Pencil Tool from the tool palette
2. Click and drag on the canvas to draw your profit/loss profile
3. Focus on key points:
   • Where do you want to breakeven?
   • What’s your maximum acceptable loss?
   • What profit potential do you want?
   • How should profits scale with price moves?

Example: Simple Bullish Strategy

Drawing a hockey stick payoff:
- Start at bottom left (loss if stock falls)
- Draw horizontal line to breakeven point
- Draw upward sloping line (unlimited profit potential)

Step 3: Review AI Suggestions

As you draw, PayoffLab’s AI engine generates strategies in real-time:

• Strategy name: e.g., “Long Call” or “Bull Call Spread”
• Instruments needed: Specific options and quantities
• Cost analysis: Net premium, margin requirements
• Risk metrics: Maximum loss, breakeven points, probability of profit

Understanding Strategy Results

Strategy Information Panel

Each AI-generated strategy shows:

Basic Details

• Strategy name and description
• Market outlook (bullish/bearish/neutral)
• Complexity level (beginner/intermediate/advanced)

Financial Metrics

• Net Cost: Total premium paid/received
• Maximum Profit: Best-case scenario return
• Maximum Loss: Worst-case scenario loss
• Breakeven Points: Prices where strategy breaks even
• Profit Probability: Likelihood of making money

Implementation Details

• Specific options to buy/sell
• Strike prices and expiration dates
• Quantities for each leg
• Current market prices

Example Strategy Result

Strategy: Bull Call Spread
Description: Buy low strike call, sell high strike call
Market Outlook: Moderately Bullish

Instruments:
- Buy 1 AAPL $150 Call @ $5.50
- Sell 1 AAPL $160 Call @ $2.25
Net Cost: $325 per spread

Risk/Reward:
- Maximum Profit: $675 (if AAPL ≥ $160)
- Maximum Loss: $325 (if AAPL ≤ $150)
- Breakeven: $153.25
- Profit Probability: 58%

Using the AI Chat Assistant

Getting Strategy Explanations

Ask natural language questions about your strategies:

“How does this bull call spread work?”

A bull call spread profits from moderate upward price movement. You buy a call option and sell another call at a higher strike price. This reduces the cost compared to buying a call alone, but also caps your maximum profit.

“What are the risks of this strategy?”

The main risks are: 1) Time decay - both options lose value over time, 2) Limited profit potential - gains are capped at the short strike, 3) Assignment risk - the short call might be exercised early if it goes deep in-the-money.

Learning About Derivatives

Use the chat to understand complex concepts:

• “Explain option Greeks in simple terms”
• “When should I use iron condors?”
• “How does volatility affect option prices?”
• “What’s the difference between American and European options?”

Getting Market Context

Ask about current market conditions:

• “Is implied volatility high right now for AAPL?”
• “What’s the probability of a 5% move in the next 30 days?”
• “Should I be buying or selling volatility in this environment?”

Common First Strategies

1. Protective Put (Portfolio Insurance)

When to use: You own stock and want downside protection

How to draw:

• Flat line showing stock gains for upward moves
• Horizontal line at your maximum acceptable loss

AI typically suggests: Buy put options below current stock price

2. Covered Call (Income Generation)

When to use: You own stock and want to generate income

How to draw:

• Upward sloping line that flattens at your target profit level
• Continuing flat even if stock rises further

AI typically suggests: Sell call options above current stock price

3. Bull Call Spread (Defined Risk Bullish)

When to use: Moderately bullish with limited capital

How to draw:

• Upward sloping line starting at a loss
• Line flattens at maximum profit level

AI typically suggests: Buy low strike call, sell high strike call

4. Iron Condor (Range-Bound Income)

When to use: Expecting sideways price movement

How to draw:

• Profit in the middle price range
• Losses on both extreme ends
• Symmetrical tent-like shape

AI typically suggests: Sell put spread and call spread

Strategy Library Management

Saving Strategies

After creating a strategy:

1. Click “Save to Library”
2. Add a descriptive name: “AAPL Bull Call Spread - January”
3. Include notes: Market conditions, reasoning, target exit
4. Set tags: Bullish, Income, Low Risk, etc.

Organizing Your Library

Folders: Group by:

• Underlying asset (AAPL, SPY, TSLA)
• Strategy type (Spreads, Straddles, Collars)
• Market outlook (Bullish, Bearish, Neutral)
• Time horizon (Short-term, Long-term)

Search and Filter:

• Find strategies by name, tags, or notes
• Filter by profitability, risk level, or date created
• Sort by performance or creation date

Sharing with Team

Individual Sharing:

• Share specific strategies with colleagues
• Include your analysis and reasoning
• Set permissions (view-only or edit)

Team Libraries:

• Create shared folders for your team
• Collaborate on strategy development
• Track team performance across strategies

Advanced Features Introduction

Scenario Analysis

Test your strategies under different conditions:

• Time decay: How does strategy perform as expiration approaches?
• Volatility changes: Impact of implied volatility expansion/contraction
• Market stress: Performance during significant market moves

Risk Management

Monitor key risk metrics:

• Position Greeks: Delta, gamma, theta, vega exposure
• Portfolio impact: How strategy affects overall portfolio risk
• Correlation analysis: Relationship with existing positions

Performance Tracking

Monitor strategy outcomes:

• Realized P&L: Actual profits and losses
• Unrealized P&L: Current position value
• Performance attribution: What drove performance?
• Learning insights: Pattern recognition for future strategies

Getting Help

Educational Resources

• Interactive Tutorials: Hands-on lessons for each strategy type
• Video Library: Visual explanations of complex concepts
• Strategy Guides: Detailed explanations with examples
• Market Commentary: Weekly insights from our derivatives experts

Support Options

Self-Service:

• Comprehensive help center with searchable articles
• Community forum with user discussions
• FAQ section covering common questions

Direct Support:

• Live Chat: Available during market hours
• Email Support: support@payofflab.com
• Screen Sharing: For complex technical issues
• Training Sessions: Group or individual training available

Community and Learning

User Community:

• Share strategies and get feedback
• Learn from experienced derivatives traders
• Participate in weekly strategy challenges
• Access to expert AMA (Ask Me Anything) sessions

Next Steps

Complete Your Setup

1. Create 3 Different Payoff Diagrams: Try bullish, bearish, and neutral views
2. Save Your First Strategy: Build your strategy library
3. Ask the AI Assistant: Get comfortable with the chat interface
4. Explore Examples: Review pre-built strategies in different market conditions

Develop Your Skills

1. Study Option Greeks: Understand how delta, gamma, theta, and vega affect your positions
2. Learn Strategy Families: Master spreads, straddles, strangles, and combinations
3. Practice Risk Management: Set position sizing rules and stop-loss levels
4. Track Performance: Monitor your strategies and learn from outcomes

Quick Start Checklist

• Account created and verified
• First payoff diagram drawn
• AI strategy suggestion reviewed
• Chat assistant question asked
• First strategy saved to library
• Mobile app downloaded (optional)
• Team members invited (if applicable)

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Troubleshooting

Common Issues

Drawing Problems

• Ensure you’re using the correct drawing tool
• Check that your payoff diagram has clear breakeven points
• Verify the underlying price range makes sense

No AI Suggestions

• Make sure your payoff diagram is complete
• Check that the profit/loss profile is realistic
• Try redrawing with simpler, clearer lines

Strategy Seems Too Expensive

• Consider wider spreads to reduce cost
• Look at different expiration dates
• Ask the AI for cost optimization suggestions

Performance Tips

• Start with simple strategies before moving to complex multi-leg positions
• Use the AI chat to understand why certain strategies are suggested
• Save multiple variations of strategies to compare costs and risks
• Practice with paper trading before committing real capital

Need more help? Use the chat assistant in the app or contact our support team at support@payofflab.com.

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Ready to create your first structured product? Start designing with PayoffLab and discover how easy it can be to implement sophisticated derivative strategies.