Options Profit Calculator
Use this calculator to estimate the potential profit or loss for various options strategies at expiration, based on the underlying stock's price.
Results:
Total Profit/Loss:
Breakeven Price:
Understanding Options 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 (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 and loss is crucial for any options trader.
Key Options Terminology:
- Call Option: Gives the holder the right to buy the underlying asset. Buyers of calls are typically bullish, expecting the stock price to rise. Sellers of calls are typically bearish or neutral, expecting the stock price to fall or stay flat.
- Put Option: Gives the holder the right to sell the underlying asset. Buyers of puts are typically bearish, expecting the stock price to fall. Sellers of puts are typically bullish or neutral, expecting the stock price to rise or stay flat.
- Strike Price: The fixed price at which the option holder can buy (for a call) or sell (for a put) the underlying asset.
- Premium: The price paid by the buyer to the seller for an option contract. This is the cost of acquiring the right.
- Expiration Date: The last day the option can be exercised. After this date, the option becomes worthless if not exercised.
- Number of Contracts: Options are typically traded in contracts, with one equity option contract usually representing 100 shares of the underlying stock.
- Transaction Costs: Brokerage commissions and fees associated with buying or selling options. These reduce your net profit or increase your net loss.
How Profit/Loss is Calculated:
The profit or loss of an option trade is determined by the difference between the stock's price at expiration and the option's strike price, adjusted for the premium paid or received, and any transaction costs. The calculator above simplifies this by allowing you to input a hypothetical stock price at expiration.
1. Buying a Call Option (Long Call):
You buy a call option if you believe the stock price will rise significantly above the strike price. Your maximum loss is limited to the premium paid plus transaction costs. Your potential profit is theoretically unlimited.
- Profit: Occurs if the stock price at expiration is greater than (Strike Price + Premium Paid per Share).
- Loss: Occurs if the stock price at expiration is less than (Strike Price + Premium Paid per Share).
- Breakeven: Stock Price at Expiration = Strike Price + Premium Paid per Share.
Example: You buy 1 Call contract (100 shares) with a Strike Price of $100 for a Premium of $2.50 per share. Transaction cost is $1.00 per contract.
- If the stock expires at $105:
- Intrinsic Value per share = $105 – $100 = $5.00
- Gross Profit per share = $5.00 – $2.50 = $2.50
- Total Gross Profit = $2.50 * 100 shares/contract * 1 contract = $250
- Net Profit = $250 – $1.00 (transaction cost) = $249.00
- If the stock expires at $102:
- Intrinsic Value per share = $102 – $100 = $2.00
- Gross Loss per share = $2.00 – $2.50 = -$0.50
- Total Gross Loss = -$0.50 * 100 shares/contract * 1 contract = -$50
- Net Loss = -$50 – $1.00 (transaction cost) = -$51.00
- If the stock expires at $95:
- Intrinsic Value per share = $0 (option expires worthless)
- Gross Loss per share = $0 – $2.50 = -$2.50
- Total Gross Loss = -$2.50 * 100 shares/contract * 1 contract = -$250
- Net Loss = -$250 – $1.00 (transaction cost) = -$251.00 (Max Loss)
2. Buying a Put Option (Long Put):
You buy a put option if you believe the stock price will fall significantly below the strike price. Your maximum loss is limited to the premium paid plus transaction costs. Your potential profit is substantial if the stock drops to zero.
- Profit: Occurs if the stock price at expiration is less than (Strike Price – Premium Paid per Share).
- Loss: Occurs if the stock price at expiration is greater than (Strike Price – Premium Paid per Share).
- Breakeven: Stock Price at Expiration = Strike Price – Premium Paid per Share.
Example: You buy 1 Put contract (100 shares) with a Strike Price of $100 for a Premium of $3.00 per share. Transaction cost is $1.00 per contract.
- If the stock expires at $90:
- Intrinsic Value per share = $100 – $90 = $10.00
- Gross Profit per share = $10.00 – $3.00 = $7.00
- Total Gross Profit = $7.00 * 100 shares/contract * 1 contract = $700
- Net Profit = $700 – $1.00 (transaction cost) = $699.00
- If the stock expires at $98:
- Intrinsic Value per share = $100 – $98 = $2.00
- Gross Loss per share = $2.00 – $3.00 = -$1.00
- Total Gross Loss = -$1.00 * 100 shares/contract * 1 contract = -$100
- Net Loss = -$100 – $1.00 (transaction cost) = -$101.00
- If the stock expires at $105:
- Intrinsic Value per share = $0 (option expires worthless)
- Gross Loss per share = $0 – $3.00 = -$3.00
- Total Gross Loss = -$3.00 * 100 shares/contract * 1 contract = -$300
- Net Loss = -$300 – $1.00 (transaction cost) = -$301.00 (Max Loss)
3. Selling a Call Option (Short Call):
You sell a call option if you believe the stock price will stay below the strike price or fall. You receive the premium upfront. Your maximum profit is limited to the premium received minus transaction costs. Your potential loss is theoretically unlimited if the stock price rises significantly.
- Profit: Occurs if the stock price at expiration is less than (Strike Price + Premium Received per Share).
- Loss: Occurs if the stock price at expiration is greater than (Strike Price + Premium Received per Share).
- Breakeven: Stock Price at Expiration = Strike Price + Premium Received per Share.
Example: You sell 1 Call contract (100 shares) with a Strike Price of $100 for a Premium of $2.50 per share. Transaction cost is $1.00 per contract.
- If the stock expires at $95:
- Intrinsic Value per share = $0 (option expires worthless)
- Gross Profit per share = $2.50 – $0 = $2.50
- Total Gross Profit = $2.50 * 100 shares/contract * 1 contract = $250
- Net Profit = $250 – $1.00 (transaction cost) = $249.00 (Max Profit)
- If the stock expires at $102:
- Intrinsic Value per share = $102 – $100 = $2.00
- Gross Profit per share = $2.50 – $2.00 = $0.50
- Total Gross Profit = $0.50 * 100 shares/contract * 1 contract = $50
- Net Profit = $50 – $1.00 (transaction cost) = $49.00
- If the stock expires at $105:
- Intrinsic Value per share = $105 – $100 = $5.00
- Gross Loss per share = $2.50 – $5.00 = -$2.50
- Total Gross Loss = -$2.50 * 100 shares/contract * 1 contract = -$250
- Net Loss = -$250 – $1.00 (transaction cost) = -$251.00
4. Selling a Put Option (Short Put):
You sell a put option if you believe the stock price will stay above the strike price or rise. You receive the premium upfront. Your maximum profit is limited to the premium received minus transaction costs. Your potential loss is substantial if the stock price falls significantly, potentially down to zero.
- Profit: Occurs if the stock price at expiration is greater than (Strike Price – Premium Received per Share).
- Loss: Occurs if the stock price at expiration is less than (Strike Price – Premium Received per Share).
- Breakeven: Stock Price at Expiration = Strike Price – Premium Received per Share.
Example: You sell 1 Put contract (100 shares) with a Strike Price of $100 for a Premium of $3.00 per share. Transaction cost is $1.00 per contract.
- If the stock expires at $105:
- Intrinsic Value per share = $0 (option expires worthless)
- Gross Profit per share = $3.00 – $0 = $3.00
- Total Gross Profit = $3.00 * 100 shares/contract * 1 contract = $300
- Net Profit = $300 – $1.00 (transaction cost) = $299.00 (Max Profit)
- If the stock expires at $98:
- Intrinsic Value per share = $100 – $98 = $2.00
- Gross Profit per share = $3.00 – $2.00 = $1.00
- Total Gross Profit = $1.00 * 100 shares/contract * 1 contract = $100
- Net Profit = $100 – $1.00 (transaction cost) = $99.00
- If the stock expires at $90:
- Intrinsic Value per share = $100 – $90 = $10.00
- Gross Loss per share = $3.00 – $10.00 = -$7.00
- Total Gross Loss = -$7.00 * 100 shares/contract * 1 contract = -$700
- Net Loss = -$700 – $1.00 (transaction cost) = -$701.00
This calculator provides a simplified view of options profit/loss at expiration. Real-world options trading involves more complex factors like time decay (theta), volatility (vega), and interest rates (rho), which affect the option's price before expiration. Always conduct thorough research and consider consulting a financial advisor before trading options.