Barchart Options Calculator

Long Call Option Profit/Loss Calculator

function calculateOptionProfit() { var underlyingPriceAtExpiration = parseFloat(document.getElementById('underlyingPriceAtExpiration').value); var strikePrice = parseFloat(document.getElementById('strikePrice').value); var premiumPaid = parseFloat(document.getElementById('premiumPaid').value); var numContracts = parseInt(document.getElementById('numContracts').value); // Input validation if (isNaN(underlyingPriceAtExpiration) || isNaN(strikePrice) || isNaN(premiumPaid) || isNaN(numContracts) || underlyingPriceAtExpiration <= 0 || strikePrice <= 0 || premiumPaid <= 0 || numContracts strikePrice) { profitOrLossPerShare = underlyingPriceAtExpiration – strikePrice – premiumPaid; } else { profitOrLossPerShare = -premiumPaid; // Loss is capped at the premium paid } var totalProfitOrLoss = profitOrLossPerShare * sharesPerContract * numContracts; // Calculate Maximum Loss var maxLoss = premiumPaid * sharesPerContract * numContracts; // Display results document.getElementById('breakevenPoint').innerText = '$' + breakevenPoint.toFixed(2); document.getElementById('profitOrLoss').innerText = '$' + totalProfitOrLoss.toFixed(2); document.getElementById('maxLoss').innerText = '$' + maxLoss.toFixed(2); } // Initial calculation on page load for default values window.onload = calculateOptionProfit;

Understanding the Long Call Option Strategy

A long call option is a bullish options strategy where an investor buys a call option, expecting the price of the underlying asset (like a stock) to rise significantly before the option's expiration date. This strategy offers unlimited profit potential with a limited risk, making it attractive for traders who anticipate a strong upward movement in a stock.

How a Long Call Option Works

When you buy a call option, you purchase the right, but not the obligation, to buy 100 shares of an underlying stock at a specific price (the "strike price") on or before a certain date (the "expiration date"). You pay a "premium" for this right. If the stock price rises above the strike price plus the premium paid, you start to make a profit. If the stock price stays below the strike price, your maximum loss is limited to the premium you paid.

Inputs Explained:

• Expected Stock Price at Expiration ($): This is the hypothetical price you anticipate the underlying stock will be trading at when the option expires. This input allows you to model different scenarios.
• Option Strike Price ($): This is the predetermined price at which the option holder can buy the underlying stock. It's a fixed value for the option contract.
• Premium Paid per Share ($): This is the cost you pay for one share's worth of the option contract. Since one option contract typically represents 100 shares, your total cost for one contract will be this premium multiplied by 100.
• Number of Contracts: This specifies how many option contracts you are buying. Each contract usually controls 100 shares of the underlying stock.

Outputs Explained:

• Breakeven Point: This is the underlying stock price at which your long call option position will neither make a profit nor incur a loss at expiration. It is calculated as the Strike Price + Premium Paid per Share.
• Profit/Loss at Expiration: This shows your total financial outcome (profit or loss) if the underlying stock closes at the "Expected Stock Price at Expiration" you entered. If the stock price is above the breakeven point, you make a profit. If it's below, you incur a loss, capped at your maximum loss.
• Maximum Possible Loss: This is the absolute most you can lose with a long call option strategy. It is always equal to the total premium you paid for the option contracts.

Example Scenario:

Let's say you believe XYZ stock, currently trading at $98, will go up significantly. You decide to buy a call option with the following details:

• Expected Stock Price at Expiration: $110
• Option Strike Price: $100
• Premium Paid per Share: $3.00
• Number of Contracts: 1

Using the calculator:

• Breakeven Point: $100 (Strike) + $3.00 (Premium) = $103.00
• Profit/Loss at Expiration: At $110, the option is in-the-money. Your profit per share is ($110 – $100 – $3.00) = $7.00. For 1 contract (100 shares), your total profit is $7.00 * 100 = $700.00.
• Maximum Possible Loss: If XYZ stock closes at or below $100, your option expires worthless. Your total loss would be the premium paid: $3.00 * 100 shares * 1 contract = $300.00.

This calculator helps you quickly assess the potential outcomes of your long call option trades under various price scenarios.