Options Profit Calculator
Options profit calculator is used to calculate your options profits or losses. Options calculator is calculated based on options price, number of contracts, current stock price, strike price.
The call options calculator calculate your total profit for your call options and the put options calculator calculates your profit for call options.
* Each contract is 100 shares
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How to Calculate Options Profit?
Follow the below steps to learn how to calculate options profit. Options price is calculated based on strike price and the current stock price.
Let's say the stock price for XYZ is trading at $50 and the options price for the stock is $1. You bought 5 contracts of call options (each contract is 100 shares) for XYZ, your total cost would be $1 x 500 = $500.
Assume the strike price for the options is $60, and the stock has risen to $70 since you bought the options. Here's how you calculate your options profit.
Total investment = $1 x 500 = $500
Current stock value = 500 x $70 = $35,000
Strike price value = 500 x $60 = $30,000
Profit Formula = Current stock value - Strike price value - Total Investment
Total Profit = $35,000 - $30,000 - $500 = $4,500.
Therefore, you made $4,500 on this options investment.
On the other hand, if the stock falls to $60 or under, then you just lose your initial investment of $500 for buying the option contracts.
You can do the calculation by yourself manually or you can just plugin the number to our options profit calculator to get the results quickly.
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What Are Options?
Options are a type of trading instrument that are derivatives based on the value of underlying stocks or other financial assets. An option gives the buyer the option to buy or sell on the type of contract that they hold on a specified future day. To have this option, the buyer has to pay a premium to the seller who writes the contract.
Following are a few terminologies used in options trading that you must know in order to trade options.
What is the option premium?
An option premium is the current market price for the options contract. Options writers collect a premium when they sell an option contract to the buyer who has the right to buy or sell the underlying stock at an agreed price and time.
The longer the expiration date, the more expensive the premium to justify the risks for options writers. Each option contract covers 100 shares of the underlying stocks.
What is a call option?
A call option gives you the right, but not the obligation to buy the underlying stock at the strike price. If you think the underlying stock would go up in value before the expiration date, you would purchase an options contract.
What is a put option?
A put option is the exact opposite of call options. An option gives you the right, but not the obligation to sell the underlying stock at the strike price. If you are bearish on the underlying stock and think the stock may go down in the near future, you may purchase put options.
What is a strike price?
The strike price is a set price for the options that you can exercise your right to buy or sell the underlying contracts before the options expire. There are two types of options contracts that you can purchase, call and put options.
What happens when options expire?
In addition to the strike price, there is another factor that is important in options trading, and that is the expiration date. Both call and put options have an expiration date. If you don't exercise your options at the expiration date, your options will expire worthlessly. There are times when it is better that you not exercise your options when the options are out of the money.
There are three statuses that an option can have, in the money, out of the money, and at the money.
What is in the money?
In the money is when an option has intrinsic value and you may exercise or sell your options for profit.
With a call option, in the money means the current stock price is higher than the strike price, and you can buy the shares at the strike price or below the current market price.
With a put option, in the money means the current stock price is lower than the strike price, and the options holder can sell the stock above the current market price.
What is out of the money?
Out of the money is when an option has no intrinsic value but has extrinsic value.
In a call option, out of the money means the current stock price is below the strike price. In a put option, out of the money means the current stock price is above the strike price.
What is at the money?
At the money is when the options strike price is equal to the current stock price. This is true for both call and put options.