Options Contract Profit/Loss Calculator
Use this calculator to determine the potential profit or loss for a single call or put option contract based on the underlying asset's price at expiration.
Calculation Results:
Enter values and click "Calculate" to see the results.
Understanding Options Contracts and Their Profit/Loss Potential
Options contracts are powerful financial derivatives that give the buyer the right, but not the obligation, to buy or sell an underlying asset (like a stock) at a predetermined price (the strike price) on or before a specific date (the expiration date). For this right, the buyer pays a premium to the seller.
Types of Options: Call vs. Put
- Call Option: A call option gives the holder the right to *buy* the underlying asset at the strike price. Buyers of call options typically expect the price of the underlying asset to rise.
- Put Option: A put option gives the holder the right to *sell* the underlying asset at the strike price. Buyers of put options typically expect the price of the underlying asset to fall.
Key Terms Explained
- Strike Price: This is the fixed price at which the option holder can buy (for a call) or sell (for a put) the underlying asset.
- Premium Paid per Share: This is the cost you pay to purchase one share's worth of the option contract. Since one option contract typically represents 100 shares, the total premium paid for one contract would be this amount multiplied by 100.
- Number of Contracts: This refers to how many option contracts you are buying. Each contract usually controls 100 shares of the underlying asset.
- Underlying Price at Expiration: This is the market price of the underlying asset (e.g., the stock price) when the option contract expires. This price is crucial for determining whether the option is "in the money" and profitable.
- Break-even Point: This is the price the underlying asset must reach at expiration for the option buyer to cover the cost of the premium paid, resulting in neither a profit nor a loss.
How Profit and Loss are Calculated
The profit or loss from an options contract depends on the relationship between the strike price, the premium paid, and the underlying asset's price at expiration.
For a Call Option Buyer:
A call option buyer profits if the underlying asset's price at expiration rises above the strike price plus the premium paid. If the underlying price is below the strike price at expiration, the option expires worthless, and the buyer loses the entire premium paid.
- Profit/Loss per Share = (Underlying Price at Expiration – Strike Price) – Premium Paid per Share (if Underlying Price > Strike Price)
- Profit/Loss per Share = -Premium Paid per Share (if Underlying Price ≤ Strike Price)
- Break-even Point = Strike Price + Premium Paid per Share
For a Put Option Buyer:
A put option buyer profits if the underlying asset's price at expiration falls below the strike price minus the premium paid. If the underlying price is above the strike price at expiration, the option expires worthless, and the buyer loses the entire premium paid.
- Profit/Loss per Share = (Strike Price – Underlying Price at Expiration) – Premium Paid per Share (if Underlying Price < Strike Price)
- Profit/Loss per Share = -Premium Paid per Share (if Underlying Price ≥ Strike Price)
- Break-even Point = Strike Price – Premium Paid per Share
Example Scenarios:
Call Option Example:
Let's say you buy 1 call option contract (100 shares) with a Strike Price of $100, paying a Premium of $2.50 per share. Your total premium cost is $2.50 * 100 = $250.
- Scenario 1: Underlying Price at Expiration is $105
- Profit per Share = ($105 – $100) – $2.50 = $5 – $2.50 = $2.50
- Total Profit = $2.50 * 100 shares = $250
- Break-even Point = $100 + $2.50 = $102.50
- Scenario 2: Underlying Price at Expiration is $98
- Loss per Share = -$2.50 (option expires worthless)
- Total Loss = -$2.50 * 100 shares = -$250 (you lose your entire premium)
Put Option Example:
You buy 1 put option contract (100 shares) with a Strike Price of $100, paying a Premium of $2.50 per share. Your total premium cost is $2.50 * 100 = $250.
- Scenario 1: Underlying Price at Expiration is $95
- Profit per Share = ($100 – $95) – $2.50 = $5 – $2.50 = $2.50
- Total Profit = $2.50 * 100 shares = $250
- Break-even Point = $100 – $2.50 = $97.50
- Scenario 2: Underlying Price at Expiration is $102
- Loss per Share = -$2.50 (option expires worthless)
- Total Loss = -$2.50 * 100 shares = -$250 (you lose your entire premium)
This calculator helps you quickly visualize these potential outcomes, allowing you to better understand the risk and reward associated with buying options contracts.