In the option trading strateges (Chapter 10), generally the axes are:
X-axis is the final stock price
Y-axis is supposed to be “strategy profit” rather than “strategy payoff”
For example, a straddle:
However, the red line should really have a label of “strategy profit”
because: Profit = Payoff - Initial cost (i.e., option premiums)
For example, the straddle above deducts the initial cost of the premiums (to show the initial net debit) so this chart is plotting profits (payoff - cost) rather then payoffs.
