A call option is a financial contract that gives the buyer (holder) the right, but not the obligation, to purchase an underlying asset (like a stock) at a specified price (the strike price) on or before a certain date (the expiration date). Buyers of call options typically expect the price of the underlying asset to rise.
The cost of acquiring this right is called the premium. This premium is paid by the buyer to the seller (writer) of the option. For each option contract, there are typically 100 shares of the underlying asset.
How the Call Option Profit Calculator Works
This calculator helps you determine the potential profit or loss from buying a call option. It takes into account the key variables involved:
Strike Price: The price at which you have the right to buy the underlying asset.
Premium Paid Per Share: The cost you paid for each share's option contract. This is a sunk cost.
Current Stock Price at Expiration: The market price of the underlying asset when the option expires.
Number of Contracts: The quantity of option contracts you purchased.
The Calculation Formula
The profit or loss for a long call position is calculated as follows:
Profit/Loss = ( (Current Stock Price at Expiration – Strike Price) – Premium Paid Per Share ) * Number of Shares per Contract * Number of Contracts
Or, more simply, the profit per share is calculated first:
Profit Per Share = Current Stock Price at Expiration – Strike Price – Premium Paid Per Share
Then, the total profit/loss is:
Total Profit/Loss = Profit Per Share * Number of Shares per Contract * Number of Contracts
Break-Even Point
The break-even point for a long call option is the stock price at expiration where you neither make a profit nor incur a loss. It's calculated as:
Break-Even Point = Strike Price + Premium Paid Per Share
If the stock price at expiration is above the break-even point, you make a profit. If it's below, you incur a loss. The maximum loss is limited to the total premium paid.
When to Use This Calculator
This calculator is useful for:
Traders: To quickly assess the potential outcome of a call option trade before entering it.
Investors: To understand the risk and reward profile of buying call options as part of a broader investment strategy.
Educators and Students: To learn and demonstrate the mechanics of call option profitability.
Example Scenario
Let's say you buy 1 call option contract on XYZ stock with:
Strike Price: $100
Premium Paid Per Share: $2.50
Number of Contracts: 1 (representing 100 shares)
If, at expiration, the stock price of XYZ is $105:
In this case, since the stock price ($105) is above the break-even point ($102.50), you have made a profit of $250. If the stock price was $102 at expiration, you would have a loss of $50 ( ($102 – $100 – $2.50) * 100 * 1 = -$50 ).
function calculateProfit() {
var strikePrice = parseFloat(document.getElementById("strikePrice").value);
var premiumPaid = parseFloat(document.getElementById("premiumPaid").value);
var currentStockPrice = parseFloat(document.getElementById("currentStockPrice").value);
var numberOfContracts = parseInt(document.getElementById("numberOfContracts").value);
var profitDisplay = document.getElementById("profitDisplay");
var breakEvenDisplay = document.getElementById("breakEven");
// Clear previous results
profitDisplay.innerHTML = "–";
profitDisplay.className = ""; // Reset class
breakEvenDisplay.innerHTML = "";
// Input validation
if (isNaN(strikePrice) || isNaN(premiumPaid) || isNaN(currentStockPrice) || isNaN(numberOfContracts) ||
strikePrice < 0 || premiumPaid < 0 || currentStockPrice < 0 || numberOfContracts <= 0) {
profitDisplay.innerHTML = "Please enter valid positive numbers.";
profitDisplay.className = "loss";
return;
}
var sharesPerContract = 100;
var profitPerShare = currentStockPrice – strikePrice – premiumPaid;
var totalProfit = profitPerShare * sharesPerContract * numberOfContracts;
var breakEvenPoint = strikePrice + premiumPaid;
var formattedProfit = totalProfit.toFixed(2);
var formattedBreakEven = breakEvenPoint.toFixed(2);
profitDisplay.innerHTML = "$" + formattedProfit;
breakEvenDisplay.innerHTML = "Break-Even Point: $" + formattedBreakEven;
if (totalProfit < 0) {
profitDisplay.className = "loss"; // Apply loss class for red color
} else {
profitDisplay.className = ""; // Default class (green)
}
}