Option Profit Calculator

Option Profit Calculator

Option Type:

Your Position:

function calculateOptionProfit() { var underlyingPriceAtExpiration = parseFloat(document.getElementById('underlyingPriceAtExpiration').value); var strikePrice = parseFloat(document.getElementById('strikePrice').value); var premiumPerShare = parseFloat(document.getElementById('premiumPerShare').value); var numContracts = parseFloat(document.getElementById('numContracts').value); var optionTypeCall = document.getElementById('optionTypeCall').checked; var positionTypeBuy = document.getElementById('positionTypeBuy').checked; var sharesPerContract = 100; // Standard for equity options // Input validation if (isNaN(underlyingPriceAtExpiration) || isNaN(strikePrice) || isNaN(premiumPerShare) || isNaN(numContracts) || underlyingPriceAtExpiration < 0 || strikePrice < 0 || premiumPerShare < 0 || numContracts strikePrice) { totalProfitLoss = (underlyingPriceAtExpiration – strikePrice – premiumPerShare) * sharesPerContract * numContracts; } else { totalProfitLoss = -premiumPerShare * sharesPerContract * numContracts; // Max loss if underlying strikePrice) { totalProfitLoss = (premiumPerShare – (underlyingPriceAtExpiration – strikePrice)) * sharesPerContract * numContracts; } else { totalProfitLoss = premiumPerShare * sharesPerContract * numContracts; // Max profit if underlying <= strike } // Breakeven breakevenPrice = strikePrice + premiumPerShare; // Max Profit maxProfit = premiumPerShare * sharesPerContract * numContracts; // Max Loss maxLoss = "Unlimited"; } } else { // Put Option if (positionTypeBuy) { // Buy Put // Profit/Loss if (underlyingPriceAtExpiration = strike } // Breakeven breakevenPrice = strikePrice – premiumPerShare; // Max Profit maxProfit = (strikePrice – premiumPerShare) * sharesPerContract * numContracts; // If underlying goes to 0 if (maxProfit < 0) maxProfit = 0; // Max profit cannot be negative // Max Loss maxLoss = premiumPerShare * sharesPerContract * numContracts; } else { // Sell Put // Profit/Loss if (underlyingPriceAtExpiration = strike } // Breakeven breakevenPrice = strikePrice – premiumPerShare; // Max Profit maxProfit = premiumPerShare * sharesPerContract * numContracts; // Max Loss maxLoss = (strikePrice – premiumPerShare) * sharesPerContract * numContracts; // If underlying goes to 0 if (maxLoss < 0) maxLoss = 0; // Max loss cannot be negative, it's the capital at risk } } document.getElementById('totalProfitLoss').innerText = '$' + totalProfitLoss.toFixed(2); document.getElementById('breakevenPrice').innerText = '$' + breakevenPrice.toFixed(2); document.getElementById('maxProfit').innerText = (typeof maxProfit === 'number' ? '$' + maxProfit.toFixed(2) : maxProfit); document.getElementById('maxLoss').innerText = (typeof maxLoss === 'number' ? '$' + maxLoss.toFixed(2) : maxLoss); } // Calculate on page load with default values document.addEventListener('DOMContentLoaded', calculateOptionProfit);

Understanding Option Profit and Loss

Options are powerful financial derivatives that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price (the strike price) on or before a certain date (the expiration date). In return for this right, the buyer pays a premium to the seller.

Key Option Terminology:

• Underlying Asset: The stock, ETF, index, or commodity on which the option is based.
• Strike Price: The predetermined price at which the underlying asset can be bought or sold if the option is exercised.
• Premium: The price paid by the option buyer to the option seller for the rights conveyed by the option contract. This is typically quoted per share, but an option contract usually covers 100 shares.
• Expiration Date: The last day the option contract is valid. After this date, the option expires worthless if not exercised.
• Call Option: Gives the holder the right to *buy* the underlying asset at the strike price. Buyers of calls are typically bullish (expect price to rise). Sellers of calls are typically bearish or neutral (expect price to fall or stay flat).
• Put Option: Gives the holder the right to *sell* the underlying asset at the strike price. Buyers of puts are typically bearish (expect price to fall). Sellers of puts are typically bullish or neutral (expect price to rise or stay flat).
• Position (Buy/Sell): Whether you are buying an option (long position) or selling/writing an option (short position).

How the Calculator Works:

This Option Profit Calculator helps you visualize the potential profit or loss of a single option contract strategy at expiration. By inputting the expected underlying price at expiration, the option's strike price, the premium paid or received, and the number of contracts, you can quickly determine your potential outcome.

The calculator considers four basic strategies:

• Buying a Call: You profit if the underlying price rises significantly above the strike price plus the premium paid. Your maximum loss is limited to the premium paid.
• Selling a Call: You profit if the underlying price stays below the strike price plus the premium received. Your maximum profit is limited to the premium received, but your potential loss is theoretically unlimited.
• Buying a Put: You profit if the underlying price falls significantly below the strike price minus the premium paid. Your maximum loss is limited to the premium paid.
• Selling a Put: You profit if the underlying price stays above the strike price minus the premium received. Your maximum profit is limited to the premium received, but your potential loss can be substantial if the underlying price drops to zero.

Example Scenario:

Let's say you believe XYZ stock, currently trading at $100, will go up. You decide to Buy 1 Call Option with a Strike Price of $100, paying a Premium of $3.00 per share. Each contract represents 100 shares.

Using the calculator:

• Underlying Price at Expiration: $105
• Option Strike Price: $100
• Premium Per Share: $3.00
• Number of Contracts: 1
• Option Type: Call
• Your Position: Buy

Upon calculation, you would find:

• Total Profit/Loss: $200.00 (Calculated as (105 – 100 – 3) * 100 * 1 = $200)
• Breakeven Price: $103.00 (Strike Price + Premium = 100 + 3)
• Maximum Profit: Unlimited
• Maximum Loss: $300.00 (Premium * Shares Per Contract * Number of Contracts = 3 * 100 * 1)

This calculator is a valuable tool for understanding the risk and reward profiles of basic option strategies, helping you make more informed trading decisions.