Explain it like I’m 5
Imagine paying your friend $5 for a promise: “Any time in the next month, I can buy your bike for $100.” If bikes like it suddenly sell for $130, your promise is great — you buy for $100 and you’re $25 ahead after the $5 you paid. If bike prices drop, you just don’t use the promise, and you’ve lost only the $5.
That promise is an option. The right to buy is a call; the right to sell is a put. The $100 is the strike price, the $5 is the premium, and the deadline is the expiration.
This calculator shows how much you’d win or lose on the deadline day for every possible stock price. Options can lose money fast, so it’s worth understanding the worst case before you start.
Words you’ll see, in plain English
- Option
- A contract that gives you the right — but not the duty — to buy or sell a stock at a set price before a set date.
- Call option
- The right to BUY a stock at a set price. It makes money if the stock goes up.
- Put option
- The right to SELL a stock at a set price. It makes money if the stock goes down.
- Strike price
- The set price in an option contract — the price you can buy or sell at.
- Premium
- The price of an option. Buyers pay it; sellers receive it.
- Expiration
- The date an option ends. After it, the option is worth exactly what it would make if used right then — or nothing.
- Breakeven
- The price where you have made exactly zero — not a win, not a loss.
More money words explained simply in our glossary.
How to use the options profit calculator
- Pick a strategy. Spreads show a second strike and premium.
- Enter the stock’s current price, the strike price and the premium per share (the option’s quoted price).
- Enter how many contracts. Each standard contract covers 100 shares.
- Read the breakeven, maximum profit and maximum loss, and use the chart to see P/L at every price at expiration.
Options profit formulas at expiration
| Strategy | Profit per share at expiration | Breakeven | Max loss |
|---|---|---|---|
| Long call | max(S − K, 0) − premium | K + premium | Premium paid |
| Long put | max(K − S, 0) − premium | K − premium | Premium paid |
| Short call | premium − max(S − K, 0) | K + premium | Unlimited |
| Short put | premium − max(K − S, 0) | K − premium | K − premium |
| Covered call | (S − entry) + premium − max(S − K, 0) | Entry − premium | Entry − premium |
| Bull call spread | Long K₁ call − short K₂ call − net debit | K₁ + net debit | Net debit |
| Bear put spread | Long K₁ put − short K₂ put − net debit | K₁ − net debit | Net debit |
S = stock price at expiration, K = strike. Multiply per-share results by 100 × number of contracts.
Example: buying a call
You buy one $100-strike call for $5.00 ($500 total). At expiration:
- Stock at $95 → the call expires worthless; you lose the $500 premium.
- Stock at $105 → the call is worth $5; you break even.
- Stock at $120 → the call is worth $20; profit is ($20 − $5) × 100 = $1,500.
Choosing between strategies
- Long calls and puts risk only the premium, but the stock must move far enough, fast enough, to pass breakeven.
- Vertical spreads lower the cost of a directional bet by selling a further-out option, in exchange for capping the maximum profit.
- Covered calls earn premium on shares you own, but give up gains above the strike.
- Short puts pay you to agree to buy shares at the strike; a cash-secured put sets aside the cash to do so.
What this calculator doesn’t model
Results are at expiration only. Before expiration an option’s price includes time value, which depends on implied volatility, time to expiration and interest rates (the inputs to models like Black-Scholes). Commissions, fees, early assignment and dividends are also excluded. Options involve significant risk and are not suitable for every investor.
Frequently asked questions
How do you calculate profit on a call option?
At expiration, a long call is worth max(stock price − strike, 0) per share. Subtract the premium you paid and multiply by 100 shares per contract. Example: a $100-strike call bought for $5 is worth $15 if the stock ends at $115, so profit is ($15 − $5) × 100 = $1,000 per contract.
What is the breakeven price of an option?
For a long call, breakeven = strike + premium paid. For a long put, breakeven = strike − premium paid. For spreads, use the net premium: a bull call spread breaks even at the lower strike + net debit; a bear put spread at the higher strike − net debit.
Why is a short call’s maximum loss unlimited?
If you sell a call without owning the stock (a naked call), you must deliver shares at the strike price no matter how high the stock goes. Because a stock price has no upper limit, the potential loss has no limit either. A covered call avoids this because the shares you own offset the short call.
Does this calculator show profit before expiration?
No. This calculator shows profit and loss at expiration, when an option is worth exactly its intrinsic value. Before expiration, options also have time value that depends on volatility, interest rates and time remaining, so their price will differ from these results.
Why multiply by 100?
A standard US equity option contract covers 100 shares of the underlying stock. Option prices are quoted per share, so a $2.50 premium costs $250 per contract.
Are commissions and assignment included?
No. Results exclude commissions, contract fees, and the effect of early assignment or dividends. Short American-style options can be assigned before expiration, especially around ex-dividend dates.
These results are estimates for education only, based on the assumptions you enter. They are not financial, investment or tax advice. Real returns, rates and taxes vary. See our methodology anddisclaimer.