How to use the options profit calculator
The calculator has four tools, one for each common question about a single option.
- Long call and Long put cover options you buy. Enter the strike, the premium per share as quoted by your broker, the number of contracts and the stock price you want to test at expiry. One standard US equity option contract covers 100 shares, so a premium of $3.20 costs $320 per contract.
- Stock price now is optional. With it, the calculator splits the premium into intrinsic value and time value, and shows how far the stock has to move to reach break-even.
- Short (sold) option covers the other side: you receive the premium and accept the obligation to buy shares at the strike (a sold put) or to deliver them (a sold call). Choose put or call.
- Break-even is the quick version. Enter a strike and the call and put premiums to see where each one pays for itself.
Commissions are optional and entered per contract, counted once when you open the trade. Under the results, a chart draws the profit or loss at every price at expiry, and a table lists it at round prices around the strike, with the strike, the break-even and your test price marked.
The formulas
At expiration an option is worth only its intrinsic value: what you would gain by exercising it.
Put value at expiry = max(K − S, 0)
Long option profit = (Value at expiry − Premium) × 100 × Contracts − Commissions
Short option profit = (Premium − Value at expiry) × 100 × Contracts − CommissionsS is the stock price at expiry, K the strike price and Premium the price per share paid or received. Each standard contract covers 100 shares.
Put break-even = K − Premium
Return on premium = Profit ÷ (Premium × 100 × Contracts + Commissions)Commissions move the break-even slightly: up for a bought call, down for a bought put, by the commission divided by the number of shares covered. For a sold option, return is measured against the premium received.
A worked example
A stock trades at $100. You buy 2 contracts of the $105 call at $3.20 per share, paying $0.65 commission per contract. The trade costs $641.30, which is also the most you can lose.
The calls break even at $108.21. If the stock finishes at $115, each call is worth $10 per share, so the position is worth $2,000.00 and the profit is $1,358.70, a return of +211.87% on the premium.
If the stock finishes at $104, below the strike, the calls expire worthless and the result is -$641.30. At $120 the profit grows to $2,358.70: above the strike, every dollar the stock rises adds $200 across the two contracts.
The long put works the same way in the other direction. Buying 2 contracts of the $95 put at $2.40 breaks even at $92.59, makes $1,518.70 if the stock drops to $85, and can make at most $18,518.70, reached only if the stock goes to zero.
Intrinsic value and time value
Before expiry, an option’s premium has two parts. Intrinsic value is what it would be worth if exercised right now: for a call, the amount the stock is above the strike; for a put, the amount it is below. Time value is everything else, the price of the chance that the option gains more before it expires.
On the Break-even tab the stock is at $101.50 and both options have a $100 strike. The call’s $4.10 premium is $1.50 of intrinsic value plus $2.60 of time value. The put is out of the money, so all of its $2.85 is time value ($2.85).
Time value shrinks as expiry approaches and is zero at expiration. That is why an option buyer can be right about the direction and still lose money: if the stock moves too slowly, the time value disappears before the intrinsic value grows enough to replace it. The break-even price captures this. The call needs a rise of 2.56% by expiry just to pay back its premium.
The buyer and the seller see the same trade
Every option has a buyer and a seller, and at expiry their results are mirror images, apart from each side’s commission. Selling the same $105 call at $3.20 that the example buyer bought gives:
| Stock at expiry | Call buyer | Call seller |
|---|---|---|
| $104 | -$641.30 | $638.70 |
| $108.20 | -$1.30 | -$1.30 |
| $115 | $1,358.70 | -$1,361.30 |
The seller wins more often, because the stock only has to stay below the break-even, but the wins are capped at the premium while the losses on an uncovered call are unlimited. Sellers of puts take on a defined but large risk. In the Short tab’s default example, selling 2 contracts of the $95 put at $2.40 keeps $478.70 if the stock stays above the strike. If the stock falls to $88, the seller must buy 200 shares at $95 and the result is -$921.30.
A put sold with enough cash set aside to buy the shares is called cash-secured; the calculator shows the return on that cash (+2.52% in the example). A call sold against 100 shares you already own per contract is a covered call, and the shares offset the loss above the strike. Our covered call calculator models the shares and the call together.
Profit before expiry depends on implied volatility
The results here are for expiration day, when an option is worth exactly its intrinsic value. If you close the position earlier, the price you get also contains time value, which depends on how long is left and on implied volatility: the market’s expectation of how much the stock will move.
A rise in implied volatility can lift an option’s price even when the stock stands still, and a drop, common right after an earnings report, can cut it even when the stock moves your way. To estimate an option’s value before expiry, use the Black-Scholes calculator. The implied volatility calculator backs out the volatility in a quoted price, and the option Greeks calculator shows how fast the price changes with the stock, with time and with volatility.
Common mistakes
- Forgetting the multiplier. A quote of $3.20 means $320 per contract. The calculator multiplies by 100 for you.
- Judging a call by the strike alone. The stock has to pass the break-even, not just the strike, before the trade makes money.
- Comparing percentage returns with the stock’s. Large option returns come with a real chance of losing 100% of the premium; the position size calculator helps keep that loss within your limits.
- Treating a sold option’s premium as income. It is a payment for taking on risk, and the maximum loss deserves as much attention as the premium.
What this calculator does not include
- Value before expiry. The chart and table assume the option is held to expiration. Closing early gives a different result that depends on implied volatility.
- Early assignment. US equity options are usually American-style and can be exercised at any time, so a seller can be assigned before expiry, especially on an in-the-money call just before an ex-dividend date.
- Bid-ask spreads. Enter your actual fill price, not the midpoint, or the results will look better than the trade.
- Exercise and assignment fees, margin requirements and taxes, which vary by broker and by account.
- Adjusted contracts. After some splits, mergers and special dividends, a contract may cover a number of shares other than 100.