Option Profit Calculator

How to Use the Option Profit Calculator

The Option Profit Calculator helps you determine the financial prospects of trading options by calculating key metrics such as Total Investment, Break-Even Price, Maximum Risk, Maximum Profit, Profit/Loss at Target Price, and Return on Investment. Follow this guide to navigate through its input fields properly and interpret the results.

Step 1: Enter the Option Type

Select the type of option you are considering from the drop-down menu: either a Call Option or a Put Option. This choice affects how the profits and losses are calculated.

Step 2: Select Your Position

Choose your position with the option: Long (Buy) if you have bought the option, or Short (Sell) if you have sold the option. This will affect calculations of potential risks and profits.

Step 3: Input the Current Stock Price

Enter the current stock price, which represents the market price of the underlying stock. Ensure this value is greater than $0.01.

Step 4: Set the Strike Price

Enter the strike price of the option contract. This price is the agreed-upon price at which the option can be exercised. It must also be greater than $0.01.

Step 5: Specify the Option Premium

Input the premium you pay for each share of the option. This value represents the cost of the option and must be greater than $0.01.

Step 6: Determine the Number of Contracts

Enter the number of option contracts you wish to trade. Note that each contract typically represents 100 shares. The minimum number you can enter is 1.

Step 7: Input the Target Stock Price

Specify the target stock price. This is the price you expect the stock to reach; the value is used to calculate potential profits or losses. Ensure it is greater than $0.01.

Understanding the Results

• Total Investment: This value indicates how much you have invested into purchasing the option contracts, based on the option premium and number of contracts.
• Break-Even Price: This price is the minimum value the underlying stock must reach for the investment to avoid a loss.
• Maximum Risk: Indicates the potential loss you might incur under unfavorable market conditions.
• Maximum Profit: Reflects the highest possible profit achievable under ideal conditions.
• Profit/Loss at Target Price: Displays the estimated profit or loss based on your target stock price.
• Return on Investment (%): Shows the percentage return relative to your initial investment.

By carefully entering each required field and analyzing these results, you can make informed decisions about your option trading strategy.