How to calculate profit on a call option?

Subtract the amount paid from the option's value at expiration and multiply that result by the number of shares held in the position. The value at expiration is calculated by subtracting the strike price from the underlying asset's price, ensuring that the result is not negative since a call would never be exercised if the market price were below it. For a single call with a strike price of 70, a purchase price of 7.50 and a share price of 82.40, the calculation would be: ((82.40 minus 70) minus 7.50), resulting in a profit per share of 4.90. Since four contracts are held to manage 400 shares, the gain is $1,960 and the cost of the position is $3,000. Ignoring this floor would incorrectly indicate that the call worth $3,000 had a loss of $7,000, which is not possible with any option.

What is the break-even price for an option?

For a call option you add the premium to the strike price while for a put option you subtract the premium from the strike price. For a long position you add the transaction cost per share and for a short position you subtract it. If a call option with a strike of 70 is purchased at 7.50 then the break even point will be 77.50. If a put option with a strike of 45 is purchased at 3.00 then the break even point will be 42.00. The breakeven price is not the same as the "at-the-money" price. At-the-money means that the underlying asset's price exactly equals the strike price and the option has a value of zero, so the buyer would have lost all the premium at this time.

What happens when an option is out of the money at expiration?

The option expires worthless and you lose the premium plus any commissions associated with it. This is your total loss. There will be no exercise, no assignment, and no shares issued. Most brokers simply remove the option from your account. If you sold an option, "out-of-the-money" is exactly what you want to happen. When the contract expires, there will be no obligation associated with it, and you keep the entire premium that you received on day one.

How to calculate profit when selling an option?

The calculation of the profit for the seller is the mirror image of that for the buyer. Subtract the value of the option at expiration from the premium received and multiply this by the number of shares held. For example, if you sell a call with an exercise price of 70 for $7.50 and the stock is trading at 60, then the option has no value and you keep the entire $7.50 per share. If the stock is at 82.40, the option will be worth $12.40, resulting in a loss of $4.90 per share. The premium is the maximum profit that can be made by selling an option. There is no limit to the potential loss when selling a call while there is only a limited loss on a put if the underlying asset goes to zero.

How many shares are controlled by a single option contract?

Standard U.S. exchange traded options are on 100 shares. So one option, as stated in 7.50 is $750 per contract. This is not a rule but a convention. Index options are usually settled with a multiplier of 100, but this does not always have to be the case. Mini contracts use 10. For options that were adjusted for a stock split, reverse stock split or special dividend, the terms of reference set out in the adjustment notice apply. Contract sizes are shown as input fields on this page, which is why. Adjusted contracts are often the most confusing.

Call & Put Option Calculator

The contract

Your position

Buying and selling are mirror images: the buyer's loss is the writer's gain. Direction changes the sign of the payoff, which side is unbounded, and what the capital at risk actually is, so it belongs in the same control as call versus put.

Buy a call

Buy a put

Sell a call

Sell a put

Strike price

Option price per share

Number of contracts

Shares per contract

The price you are testing

Underlying price at expiry

Underlying price today

Days to expiration

days

Include commission and fees

Charged per contract and covering the round trip, so the figure is deducted once against the position rather than twice.

Profit or loss at expiry

Break-even price

Return on capital

Work backwards from a profit target

Profit or loss at expiry

Return on capital: %
Break-even price at expiry: $
Cash at the start: $

Above the strike the call finishes in the money: it is worth 12.4 a share, which is real money you can collect. Whether that is a profit depends on what you paid, and the break-even card is the line that decides it.

Most this can lose: $
Profit or loss per share: $

A bought call has no ceiling. There is no share price the calculator could stop at, so there is no maximum profit to print. What is fixed is the downside: the premium, and nothing beyond it, however far the stock falls.

Option worth per share at expiry: $
Contracts worth at expiry: $
Shares controlled

Intrinsic value per share today: $
Time value per share today: $
Time value's share of the premium: %

2.5 a share of what you are paying is time value, sitting on top of 5 of intrinsic value. Time value has nothing behind it and decays to exactly zero by expiry whatever the stock does, which is why an option can move your way and still lose money.

Return annualised: %
Move needed to break even: %
Premium on the whole position: $

Capital the return is measured on: $

The return is measured against the debit: the premium plus any fees is the whole of what you put up and the whole of what you can lose, so it is the only sensible denominator for a bought option.

Everything on this page is the position AT EXPIRATION, where an option is worth its intrinsic value and nothing else. Close it early and you get whatever the market will pay, which is intrinsic value plus whatever time value has not yet decayed. Pricing that needs a model.

The payoff curve and the price ladder

Show the payoff diagram

The payoff curve at expiry and the split of today's premium into intrinsic value and time value.

Show the price ladder

Profit and loss at thirteen prices around where the stock trades today.

Five percent steps either side of where the underlying trades today. Every row is the position at expiration, with fees already included when the fee switch is on.
Underlying at expiry	Option worth per share	Profit or loss per share	Profit or loss on the position	Return on capital
52.5	0	-7.5	-3,000	-100.0%
56.25	0	-7.5	-3,000	-100.0%
60	0	-7.5	-3,000	-100.0%
63.75	0	-7.5	-3,000	-100.0%
67.5	0	-7.5	-3,000	-100.0%
71.25	1.25	-6.25	-2,500	-83.3%
75	5	-2.5	-1,000	-33.3%
78.75	8.75	1.25	500	16.7%
82.5	12.5	5	2,000	66.7%
86.25	16.25	8.75	3,500	116.7%
90	20	12.5	5,000	166.7%
93.75	23.75	16.25	6,500	216.7%
97.5	27.5	20	8,000	266.7%

An options contract is like a bet with a receipt. You know exactly how much you paid and you can calculate exactly what you would receive at every possible price level of the underlying asset. The real problem is finding where those two values meet.

On this page we calculate the break-even point for the four different types of positions that can be held. Buying calls, buying puts, selling calls and selling puts are all distinct trades with very different risk profiles but most options profit/loss calculators only support the first two.

The four types of positions:

Whether you buy a call or put determines which direction you can profit from. Whether you buy or sell determines who bears the risk. These are two separate issues that combine to give four different trades.

Position	You want the underlying to	Most you can make	Most you can lose
Buy a call	rise above the strike	Unlimited	The premium you paid
Buy a put	fall below the strike	Strike minus premium, times the shares	The premium you paid
Sell a call	stay below the strike	The premium you collected	Unlimited
Sell a put	stay above the strike	The premium you collected	Strike minus premium, times the shares

If you look at the table horizontally, you can see immediately that it's a mirror image relationship. The upper limit of the buyer is the lower limit of the seller. That's what an option really is about: one party pays for the right and the other party receives compensation for taking on an obligation. And whatever one side gains, the other side loses by the same amount.

Calculation equations

At expiration the value of an option is equal to its intrinsic value since there is no time left for it to exercise. The intrinsic value represents the profit that would be made by exercising immediately. No one is forced to exercise a contract they are losing on, so the value can never go below zero.

V_{\text{call}} = \max\left(S - K,\; 0\right) \qquad V_{\text{put}} = \max\left(K - S,\; 0\right)

S is the price of the underlying at expiration and K is the strike price. The max function represents the all or nothing difference between an option and a stock and is a term that is missing from many common formulas.

The profit per share is the difference between the value and the amount paid for it. For the seller, it's the difference between the amount received and the value.

\text{profit}_{\text{bought}} = V - P \qquad \text{profit}_{\text{sold}} = P - V

P is the stock price of an option. Multiplying this value by the number of shares held in a position gives you the total amount.

N = \text{contracts} \times \text{shares per contract} \qquad \text{Profit} = \left(V - P\right) \times N

U.S. standard stock options contain 100 shares per contract. To buy the four options offered at $7.50, for example, you would pay $3,000 and control 400 shares. This factor is not a natural constant however. Other factors may be used in index options, mini contracts or contracts adjusted for stock splits. For this reason, the factor on this page is not hard-coded but provided as an input field.

Break-even point and why it is not an at-the-money price.

The break-even point is the price of the underlying at which a position just covers its costs. When buying a call, this means that the strike price must be exceeded and in addition the premium has to be recouped.

\text{break-even}_{\text{call}} = K + P \qquad \text{break-even}_{\text{put}} = K - P

When selling options the direction of the impact of the premium on cost changes but not the effect on strike price. Therefore the break even point when selling a call is the same as buying a call except in the opposite direction. If below it makes a profit, if above it makes a loss.

It must be said here that this is a widespread error which can even be found on the first page of search results for this keyword: "At-the-Money" is not the break-even point. "At-the-Money" means that the price of the underlying asset exactly matches the exercise price, and at this price the option has a value of zero. When buying an option, you lose the entire premium at the "At-the-Money" price. The break-even point is slightly cheaper, namely one premium higher.

Example calculation (when buying a call):

A call with a strike price of $70 is offered at $7.50 per share. You buy four contracts and assume the stock price will be $82.40.

Step	Working	Result
Shares controlled	4 contracts times 100	400
Premium paid	7.50 times 400	3,000
Option value at expiry	max(82.40 minus 70, 0)	12.40 a share
Profit per share	12.40 minus 7.50	4.90
Profit on the position	4.90 times 400	1,960
Return on capital	1,960 divided by 3,000	65.33 percent
Break-even	70 plus 7.50	77.50

Let's change a number: Say the stock price is $60 instead of $82.40. The top search result for this keyword displays the following formula: (60 minus 70 minus 7.50). This results in a loss of $17.50 per share, or a loss of $7,000 on a position with $3,000 in costs.

That's impossible. The loss on a purchased option can never exceed the price paid, since there is no obligation to exercise it. The correct answer is max(60 − 70, 0) − 7.50, which is a $7.50 per share or total $3,000 loss. This is exactly the amount paid. The lack of this floor is why an option is safer than an equivalent stock position. Several calculators on the first page of search results do not account for this floor.

Example calculation (buying a put option)

A put option with a strike price of $45 is offered at a cost of $3.00 per share. You buy one contract and assume the stock is trading at $35.

Step	Working	Result
Shares controlled	1 contract times 100	100
Premium paid	3.00 times 100	300
Option value at expiry	max(45 minus 35, 0)	10.00 a share
Profit per share	10.00 minus 3.00	7.00
Profit on the position	7.00 times 100	700
Return on capital	700 divided by 300	233.33 percent
Break-even	45 minus 3.00	42.00

Unlike call options, put options have a lower bound. Since the stock price cannot go below zero, the maximum return from this position is the strike price minus the cost of the option, or $42 per share, or $4,200 for the contract. This upper bound is why a deep in-the-money protective put is more like insurance than gambling.

The side that almost no one calculates (selling an option)

Every option purchased is sold by someone. The seller, or the writer of the option, receives the premium on day one and assumes this obligation until expiration.

If you sell a call with a strike price of 70 and an offer price of 7.50, the direction of the calculation is reversed. You receive $3,000 for four contracts. If the stock price is at 60, the option expires worthless and you keep the entire amount. If the price is at 82.40, you are assigned and must sell the stock at a price above the strike of 12.40. The position is worth $4.90 per share for a loss of $1,960.

The break-even point is also at 77.50. The difference is which side you want to be on and what happens next. When selling a call there is no upper limit. At 200 it would be a loss of $122.50 per share, at 500 it would be a loss of $422.50, and there is no stock price that stops this calculation.

The risk of selling a put option is limited because there is a floor on the stock price. In the worst case scenario, the stock price falls to zero, so you will receive an assignment at the strike price but the stock has no value. The loss is the difference between the strike price and the premium received, multiplied by the number of shares held.

Return on capital: What should be in the denominator?

To calculate percentage return you need a denominator. When buying an option the only honest candidate is pure outlay. As all fees are added to the premium and this is the total amount you invest and potentially lose, then your return is profit divided by that amount.

Selling options is definitely more complicated. This is probably why the calculators on the first page of search results don't even want to calculate it at all. When you sell an option no money is actually debited from your account. What is instead pledged is a security, and the appropriate procedure depends upon how the position is secured.

Position	Capital the return is measured on	Why
Bought call or put	Premium plus fees	It is the whole amount at risk
Sold put, cash secured	Strike times shares controlled	The cash you must hold to buy the shares on assignment
Sold call, covered	Underlying price times shares controlled	The value of the shares you must be able to deliver
Sold call, naked	Broker margin	Varies by firm and moves with the share price, so no page can state it

This calculation tool shows the reference values used in separate areas. The percentage without a denominator is not a return but a pure representation.

Intrinsic Value and Time Value

If you enter the current market price of the underlying asset, it will split up into two components; intrinsic value and time value. The intrinsic value is the value of the option if it were to expire immediately. Time value covers everything else.

P = \underbrace{\max\left(S_{0} - K,\; 0\right)}_{\text{intrinsic}} \;+\; \underbrace{\left(P - \max\left(S_{0} - K,\; 0\right)\right)}_{\text{time value}}

The time value is the amount you pay for the possibility of making a good decision later on. It decreases regardless of how the underlying asset performs and reaches exactly zero at maturity. The closer to maturity it gets, the faster it falls.

This breakdown often explains the most common complaint about options: why did I lose money even though the stock moved in my expected direction? If the stock is at 75 and the strike price is 70, a call option with a price of 7.50 contains an intrinsic value of 5.00 and a time value of 2.50. Two-thirds of the price is already real money. The remaining third must be recouped by further stock movement before expiration.

Topics that are not covered on this page:

Here only positions at the time of expiration are considered. If a position is closed before expiry, one gets the market value that the market would pay for this contract plus the remaining time value. To calculate this value requires a price model, not just arithmetic operations. That's a separate tool.

This is not investment advice and does not provide probabilities. The calculator only answers one question: what would be the value of a position if the final price of the underlying were this calculated price? The probability that this price will be reached is entirely up to your own judgment.

Frequently asked questions

How to calculate profit on a call option?: Subtract the amount paid from the option's value at expiration and multiply that result by the number of shares held in the position. The value at expiration is calculated by subtracting the strike price from the underlying asset's price, ensuring that the result is not negative since a call would never be exercised if the market price were below it. For a single call with a strike price of 70, a purchase price of 7.50 and a share price of 82.40, the calculation would be: ((82.40 minus 70) minus 7.50), resulting in a profit per share of 4.90. Since four contracts are held to manage 400 shares, the gain is $1,960 and the cost of the position is $3,000. Ignoring this floor would incorrectly indicate that the call worth $3,000 had a loss of $7,000, which is not possible with any option.
What is the break-even price for an option?: For a call option you add the premium to the strike price while for a put option you subtract the premium from the strike price. For a long position you add the transaction cost per share and for a short position you subtract it. If a call option with a strike of 70 is purchased at 7.50 then the break even point will be 77.50. If a put option with a strike of 45 is purchased at 3.00 then the break even point will be 42.00. The breakeven price is not the same as the "at-the-money" price. At-the-money means that the underlying asset's price exactly equals the strike price and the option has a value of zero, so the buyer would have lost all the premium at this time.
What happens when an option is out of the money at expiration?: The option expires worthless and you lose the premium plus any commissions associated with it. This is your total loss. There will be no exercise, no assignment, and no shares issued. Most brokers simply remove the option from your account. If you sold an option, "out-of-the-money" is exactly what you want to happen. When the contract expires, there will be no obligation associated with it, and you keep the entire premium that you received on day one.
How to calculate profit when selling an option?: The calculation of the profit for the seller is the mirror image of that for the buyer. Subtract the value of the option at expiration from the premium received and multiply this by the number of shares held. For example, if you sell a call with an exercise price of 70 for $7.50 and the stock is trading at 60, then the option has no value and you keep the entire $7.50 per share. If the stock is at 82.40, the option will be worth $12.40, resulting in a loss of $4.90 per share. The premium is the maximum profit that can be made by selling an option. There is no limit to the potential loss when selling a call while there is only a limited loss on a put if the underlying asset goes to zero.
Why can an option incur losses even if the stock price has moved in the expected direction?: A portion of the amount you pay is the time value, and that time value will be zero on expiration date no matter how the underlying asset performs. For example, if the stock price is 75 and the strike price is 70, a call option with a price of 7.50 contains an intrinsic value of 5.00 and a time value of 2.50. The stock price would have to rise another 2.50 from its current level before the position breaks even. This is what the break-even point indicates, and why an option can still incur losses when it is "in-the-money".
How many shares are controlled by a single option contract?: Standard U.S. exchange traded options are on 100 shares. So one option, as stated in 7.50 is $750 per contract. This is not a rule but a convention. Index options are usually settled with a multiplier of 100, but this does not always have to be the case. Mini contracts use 10. For options that were adjusted for a stock split, reverse stock split or special dividend, the terms of reference set out in the adjustment notice apply. Contract sizes are shown as input fields on this page, which is why. Adjusted contracts are often the most confusing.

Related calculators

Black-Scholes CalculatorPrice European call and put options with the Black-Scholes-Merton model. Get the call price, put price, the Greeks, and the volatility implied by a market price.

Stock Price CalculatorCalculate your profit or loss and return on a stock trade, with commissions, dividends, capital gains tax, break-even price, and annualized return.

Break-Even CalculatorWork out the break-even point in units and revenue from fixed costs, price, and variable cost per unit, with contribution margin, margin of safety, a profit target, and a cost-volume-profit chart.

Markup CalculatorCalculate markup, margin, selling price, cost, and profit. Enter any two values and solve for the rest, price a batch of units, and see the cost-vs-profit split.

Accounting Profit CalculatorCalculate accounting profit (net income) from revenue and explicit costs, with the full profit ladder, net and gross margins, and an optional economic-profit view.

Net Profit Margin CalculatorCalculate net profit margin, net profit, or revenue from any two values, with a revenue breakdown, gross and operating margins, markup, and industry benchmarking.

Disclaimer: This calculator is provided for general informational and educational purposes only. Our calculators are under active development, and results may be inaccurate, incomplete, or unsuitable for your situation. Always verify the figures independently and seek advice from a qualified professional before relying on them. We make no warranties and accept no liability for any loss or decision arising from use of this tool.

References

OCC - Characteristics and Risks of Standardized Options
The options disclosure document every broker must give you before you trade. The definitive statement of what exercise, assignment and contract adjustment actually mean.
U.S. Securities and Exchange Commission - Investor Bulletin: An Introduction to Options
The regulator's own plain-language description of calls, puts, premiums and the risks on each side of the contract.
Cboe - Equity Options Product Specifications
Where the 100-share contract multiplier, the settlement style and the expiration conventions are actually specified.
Jawwad Ahmed Farid - Calculating Cash P&L for a Call Option, in An Option Greeks Primer (Palgrave Macmillan, 2015)
The cash profit and loss derivation this page implements, including the treatment of the premium as sunk capital at risk.
Investopedia - Options Trading: Intrinsic Value and Time Value
The split of a premium into intrinsic value and time value, and why the second half is guaranteed to reach zero.