Options Profit Calculator
Use this calculator to determine the potential profit or loss for a single options contract trade (either a Call or a Put option).
Understanding Options Profit
Options are 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). Understanding how to calculate potential profit or loss is crucial for options traders.
Key Terms:
- Strike Price: The fixed price at which the underlying asset can be bought (for a call option) or sold (for a put option).
- Premium Paid: The cost you pay to purchase one option contract. This is typically quoted per share, but one contract usually represents 100 shares.
- Number of Contracts: The quantity of option contracts you purchase. Each standard contract typically controls 100 shares of the underlying asset.
- Underlying Asset Price at Expiration: The market price of the stock or asset when the option is exercised or expires. This is the critical price for determining profit or loss.
- Call Option: Gives the holder the right to buy the underlying asset at the strike price. Buyers profit if the underlying asset's price rises above the strike price plus the premium paid.
- Put Option: Gives the holder the right to sell the underlying asset at the strike price. Buyers profit if the underlying asset's price falls below the strike price minus the premium paid.
How the Calculator Works:
This calculator helps you determine the potential profit or loss for a long (bought) call or put option position. It takes into account the strike price, the premium you paid, the number of contracts, and the underlying asset's price at expiration.
For a Call Option:
A call option buyer profits when the underlying asset's price at expiration is significantly higher than the strike price. The breakeven point for a call option is the Strike Price + Premium Paid per Share. Any price above this point results in profit.
Profit/Loss per Share = (Underlying Asset Price at Expiration - Strike Price) - Premium Paid per Share
Total Profit/Loss = Profit/Loss per Share * 100 * Number of Contracts
For a Put Option:
A put option buyer profits when the underlying asset's price at expiration is significantly lower than the strike price. The breakeven point for a put option is the Strike Price – Premium Paid per Share. Any price below this point results in profit.
Profit/Loss per Share = (Strike Price - Underlying Asset Price at Expiration) - Premium Paid per Share
Total Profit/Loss = Profit/Loss per Share * 100 * Number of Contracts
Example Scenarios:
Example 1: Buying a Call Option
- Option Type: Call
- Strike Price: $100
- Premium Paid per Share: $2.50
- Number of Contracts: 1
- Underlying Asset Price at Expiration: $105
In this case, the total premium paid is $2.50 * 100 * 1 = $250. The breakeven price is $100 + $2.50 = $102.50. Since the expiration price ($105) is above the breakeven, you make a profit.
Profit per share = ($105 – $100) – $2.50 = $5 – $2.50 = $2.50
Total Profit = $2.50 * 100 * 1 = $250
Example 2: Buying a Put Option
- Option Type: Put
- Strike Price: $100
- Premium Paid per Share: $2.50
- Number of Contracts: 1
- Underlying Asset Price at Expiration: $90
Here, the total premium paid is $2.50 * 100 * 1 = $250. The breakeven price is $100 – $2.50 = $97.50. Since the expiration price ($90) is below the breakeven, you make a profit.
Profit per share = ($100 – $90) – $2.50 = $10 – $2.50 = $7.50
Total Profit = $7.50 * 100 * 1 = $750
Remember that options trading involves significant risk and is not suitable for all investors. Always understand the potential for loss before trading.