Evaluating the risk/reward profile of a trade is an important part of trading options, helping you make more informed decisions and optimize your strategies.
Our investment calculator helps you estimate profits and losses for call options and put options by considering various factors such as strike price, premium, share price and number of contracts.
Input your details to quickly see the potential outcomes of your options trades.
Enter the following details to estimate your options profit or loss:
Use the following formula to calculate the potential profit from a call option, assuming it’s in the money at expiration:
Profit = (Stock Price at Expiration – Strike Price – Premium Paid) * Number of Contracts * 100
If the stock price at expiration is below or equal to the strike price, the option expires out of the money. The profit is the negative of the premium paid because the option expires worthless.
Use the following formula to calculate the potential profit from a put option, assuming it’s in the money at expiration:
Profit = (Strike Price – Stock Price at Expiration – Premium Paid) * Number of Contracts * 100
If the stock price at expiration is above or equal to the strike price, the option expires out of the money. The profit is the negative of the premium paid since the option expires worthless.
Options trading is a strategy that gives you the flexibility to buy or sell a stock at a set price within a specific timeframe, which can be a powerful tool for both managing risk and pursuing bigger returns.
It’s different from regular stock trading because it lets you speculate on price movements or protect your investments with more precision.
You might buy a call option if you believe the price of a stock will rise above the option’s strike price before the option expires. This allows you to purchase the stock at a lower price and potentially sell it at a higher market value for a profit.
On the other hand, you might buy a put option if you believe the price of a stock will decline before the option expires. This gives you the right to sell the stock at a higher strike price, which can either protect your investment from losses or allow you to profit from the drop in the stock’s value.
If you’re looking to explore options trading further, understanding the basics of options trading and finding the right platforms can be key to getting started.
Learn the basics of put options: what they are, how they work and a few examples.
Learn the basics of call options: what they are, how they work and examples.
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