Options Profit Calculator
Use this calculator to determine the potential profit or loss for a single options contract (call or put, bought or sold) based on the underlying stock's price at expiration.
Call Option
Put Option
Buy Option
Sell Option
Understanding Options Profitability
Options are financial derivatives that give the buyer the right, but not the obligation, to buy or sell an underlying asset 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 any options trader.
Key Terms Explained:
- Option Type (Call/Put):
- A Call Option gives the holder the right to *buy* the underlying asset. Buyers profit if the underlying price rises above the strike price. Sellers profit if the underlying price stays below the strike price.
- A Put Option gives the holder the right to *sell* the underlying asset. Buyers profit if the underlying price falls below the strike price. Sellers profit if the underlying price stays above the strike price.
- Trade Type (Buy/Sell):
- Buy Option: You pay a premium to acquire the right. Your maximum loss is typically the premium paid.
- Sell Option (Write Option): You receive a premium for granting the right to someone else. This can involve unlimited risk for call options or substantial risk for put options if the underlying moves significantly against your position.
- Strike Price: The fixed price at which the option holder can buy (for a call) or sell (for a put) the underlying asset.
- Premium per Share: The price paid or received for one share's worth of the option contract. Since one option contract typically represents 100 shares, the total premium for one contract is Premium per Share * 100.
- Number of Contracts: The total number of option contracts being traded. Each contract usually controls 100 shares of the underlying asset.
- Underlying Price at Expiration: The market price of the underlying stock when the option contract expires. This is the critical price point for determining if an option is "in the money" or "out of the money."
How the Calculator Works:
This calculator takes your chosen option type, trade type, strike price, premium, number of contracts, and the hypothetical underlying price at expiration to determine your total net profit or loss. It also calculates your breakeven point.
- For Call Option Buyers: You profit if the underlying price at expiration is above the strike price plus the premium paid. Your breakeven is Strike Price + Premium.
- For Put Option Buyers: You profit if the underlying price at expiration is below the strike price minus the premium paid. Your breakeven is Strike Price – Premium.
- For Call Option Sellers: You profit if the underlying price at expiration is below the strike price plus the premium received. Your breakeven is Strike Price + Premium.
- For Put Option Sellers: You profit if the underlying price at expiration is above the strike price minus the premium received. Your breakeven is Strike Price – Premium.
Example Scenarios:
Example 1: Buying a Call Option
You believe XYZ stock, currently trading at $98, will go up. You buy 1 Call Option contract with a Strike Price of $100, paying a Premium of $2.50 per share. You hold it until expiration, and XYZ is trading at $105.
- Option Type: Call
- Trade Type: Buy
- Strike Price: $100
- Premium per Share: $2.50
- Number of Contracts: 1
- Underlying Price at Expiration: $105
Calculation:
- Intrinsic Value per Share: max(0, $105 – $100) = $5.00
- Net Profit per Share: $5.00 (intrinsic value) – $2.50 (premium) = $2.50
- Total Net Profit: $2.50 * 100 shares/contract * 1 contract = $250.00
- Breakeven Price: $100 (strike) + $2.50 (premium) = $102.50
Since $105 is above the breakeven of $102.50, you make a profit.
Example 2: Selling a Put Option
You believe ABC stock, currently at $52, will stay above $50. You sell 2 Put Option contracts with a Strike Price of $50, receiving a Premium of $1.80 per share. At expiration, ABC is trading at $51.
- Option Type: Put
- Trade Type: Sell
- Strike Price: $50
- Premium per Share: $1.80
- Number of Contracts: 2
- Underlying Price at Expiration: $51
Calculation:
- Intrinsic Value per Share: max(0, $50 – $51) = $0.00 (option expires worthless)
- Net Profit per Share: $1.80 (premium received) – $0.00 (intrinsic value) = $1.80
- Total Net Profit: $1.80 * 100 shares/contract * 2 contracts = $360.00
- Breakeven Price: $50 (strike) – $1.80 (premium) = $48.20
Since $51 is above the breakeven of $48.20, you keep the full premium as profit.
This calculator provides a simplified view for single-leg options. Real-world options trading involves commissions, bid-ask spreads, and more complex strategies, but this tool is an excellent starting point for understanding the basics of options profitability.