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Stock Options Calculator:
Calculate Your Investment Profits

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How to Use the Stock Options Calculator

The stock option calculator shows you profit and loss scenarios for buying calls and puts. It’s easy to use, it’s free, and only requires only a few pieces of information.

Here are the steps for calculating your option’s potential profit.

  1. Choose whether you are buying a call option or put option.

  2. Input the option expiration date. This is optional, as it will not affect the calculation.Type the option strike price.

  3. Key in the number of options contracts. This will affect the cost and total profit.

  4. Input the price per share of the option. This is how option prices are typically quoted on financial websites and trading platforms.

  5. Total Cost is calculated for you. The total cost of each contract is the option price x 100 shares, since contracts are for 100 shares.

 

6. Input the current price of the stock.

7. Insert the Estimated Stock Price at Expiration. This is the target price you think the stock may trade at prior to expiration. Input different estimates to see various profit and loss scenarios.

8. Expected Change is calculated for you. It’s the percentage and dollar difference between the Estimated future stock price and the Current stock price.

9. Total Return on Option is calculated for you and is the dollar profit you make over and above the cost. It also shows the percentage difference between your profit and cost.

Basic Guide to Understanding Stock Options

Buying a stock option gives the option owner the right to buy (call option) or sell (put option) the underlying stock at a specified price (strike price) before a certain date (expiration date).

Call Options Explained

  • Here is an example of a call option
  • Let’s say a stock is trading at $48 and you believe it will go higher in the next few months.
  • You buy a call option with a strike price of $50 and an expiration in three months.
  • For this option, you pay a fee (called a premium) of $1 per share. An option contract is for 100 shares, so this option costs you $100. No matter what the underlying stock price does, $100 is the most you can lose on this trade. If you buy two contracts, the cost is $200 ($1 premium x 200 shares).
  • The price (the premium) of your call option will fluctuate until expiration. So you can sell your option at any time to lock in a profit or loss.
  • If the stock price rises, your option is likely to increase in value. Your potential return is unlimited.
  • If the stock price falls, your option becomes worth less. And at expiration, if the stock price is below $50 then it is worth nothing.
  • Here is an example of a call option
  • Let’s say a stock is trading at $48 and you believe it will go higher in the next few months.
  • You buy a call option with a strike price of $50 and an expiration in three months.
  • For this option, you pay a fee (called a premium) of $1 per share. An option contract is for 100 shares, so this option costs you $100. No matter what the underlying stock price does, $100 is the most you can lose on this trade. If you buy two contracts, the cost is $200 ($1 premium x 200 shares).
  • The price (the premium) of your call option will fluctuate until expiration. So you can sell your option at any time to lock in a profit or loss.
  • If the stock price rises, your option is likely to increase in value. Your potential return is unlimited.
  • If the stock price falls, your option becomes worth less. And at expiration, if the stock price is below $50 then it is worth nothing.

Here are the scenarios that can play out, with further explanations below:

Stock price is at $51 at expiration: this is your break even point.

Stock price is above $51 at expiration: you make a profit over and above your cost.

Stock price is below $50 at expiration: the call is worthless and you lose the $100 you spent on it.

Stock is between $50.01 and $50.99 at expiration: you have a partial loss of the $100 you spent on the option.

As expiration approaches, if the stock is trading at $55, your option will likely have a premium of about $5. Because that is what the option is worth. It is giving you the right to buy the stock at $50 while the stock is at $55. That’s a $5 advantage. You only paid $1 for the option contract so you net a $400 profit (($5-$1) x 100 shares).

If the stock price goes even higher, you make a larger profit.

What if the stock only goes up a little? You paid $1 for the option, with a strike price of $50. Add these two together to get your breakeven point: $51. The stock price needs to move above $51 for you to make money. 

If the stock price doesn’t move above $51, then you can sell the option for whatever you can get to reduce your loss. 

If the stock is trading at $50 or below at expiration the option is worth nothing, because it provides no advantage. You lose the $100 spent on the call option, regardless of how far the stock price drops below $50.

Put Options Explained

  • Here is an example of a put option. 
  • Assume a stock is trading at $33 and you think it will drop in the next month.
  • You could buy a put option with a strike price of $30 and an expiration in one month.
  • Assume the premium is $1, which means it costs $100 per contract. If purchasing one contract, that is your maximum risk of loss on the trade.
  • If the stock price falls your option increases in value.
  • If the stock price rises, the put option becomes worth less. At expiration, if the stock price is above $30 the put is worth nothing.
  • Here is an example of a put option. 
  • Assume a stock is trading at $33 and you think it will drop in the next month.
  • You could buy a put option with a strike price of $30 and an expiration in one month.
  • Assume the premium is $1, which means it costs $100 per contract. If purchasing one contract, that is your maximum risk of loss on the trade.
  • If the stock price falls your option increases in value.
  • If the stock price rises, the put option becomes worth less. At expiration, if the stock price is above $30 the put is worth nothing.

Here are the scenarios that can play out, with further explanations below:

Stock price is at $29 at expiration: this is your break even point.

Stock price is below $29 at expiration: you make a profit over and above your cost.

Stock price is above $30 at expiration: the call is worthless and you lose the $100 you spent on it.

Stock is between $29.01 and $29.99 at expiration: you have a partial loss of the $100 you spent on the option.

If the stock drops below $30, your option has some value, but it may not be enough to compensate you for the $1 ($100) you paid.

The price needs to get below $29 for you to make more than you paid.  The more the stock drops below $29 the larger your put option profit. If the stock drops to $26, your put option has a value of $4 ($30 – $26) but you paid $1 for it. You net $3 or $300 per contract.

If the stock price stays above $30, the option has no advantage. For example, if the stock is trading at $31 at expiration, the put option will be worthless. No one wants the right to sell the stock at $30 when they can sell it at the current market price of $31 right now. The option is worthless and the $100 paid for the option is forfeited.

Options Trading FAQs

Here are the scenarios that can play out, with further explanations below:

What is exercising an option?

Exercising an option is when you take delivery of the position the option gives you the right to. Most options are not delivered. Rather, you just sell the option if it shows you a profit.

If a call option has a strike price of $50 and the stock price is at $55 at expiration, you can sell your option to realize your profit on the option, or, you can exercise your option and receive 100 shares of the stock at $50. Most brokers charge a fee for exercising an option.

What does writing options mean?

If you buy an option, someone else “wrote” that option. They receive the premium you paid for the option. That is their maximum profit, so they are usually hoping that the option expires worthless and they get to keep the whole premium as profit. 

 

The writer of the option has the obligation to deliver the shares/position to you if you choose to exercise your option.

How are options premiums determined?

The premium of an option is determined by “the Greeks”. These are variables that affect the price of the option. At expiration, the only thing that matters is the price of the underlying relative to the strike price, but up until expiration, the price of the option is based on other factors such as the volatility of the underlying, how long there is till expiration (called “time value”), and other factors.

What are in the money options and out of the money options?

For a call, if the stock price is already above the strike price, that is called “in the money”. If the stock price is below the strike price, the option is “out of the money”. 

 

For a put, if the stock price is below the strike price, the option is in the money. If the stock price is above the strike price the option is out of the money.

Is options trading better than stocks?

Options are a different way to trade compared to buying or shorting stocks directly on the stock exchange. One market isn’t better or worse. Both have advantages and disadvantages. With buying options you pay an upfront premium (cost) and have an expiry date, but can make large percentage returns if the underlying asset does what you expect as they have a leveraged nature. With stocks you own the asset, don’t have an expiry, but have to lay out all the capital for the trade (not just a premium, which is typically a tiny fraction of the stock price).

What’s the difference between option volume and option open interest?

Options volume is the number of contracts that change within a given period of time, such as a day. This is called daily options volume. Open interest is how many contracts are outstanding or are open. Option trades are marked “to open” or “to close” which means you are either buying or selling to open or close your position. Existing open positions, plus new option positions, less closed positions create open interest. Open interest is different from options volume.

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