Call Option Calculator

Background.

Buying a call option buys a right without an obligation: the right to purchase a stock or other asset at a fixed strike price, with the right expiring on a set date. Whether that right is worth anything at the end comes down to one comparison. If the asset finishes above the strike, the holder can buy at the strike and is ahead by the difference. If it finishes at or below, nobody would pay the strike for something cheaper in the market, and the option lapses worthless.

That gives a long call its lopsided shape. The most the buyer can lose is the premium paid to open the position. The gain has no fixed ceiling, because it grows unit for unit with every point the price ends above the strike. In between sits the break-even price, the strike plus the premium, where the payoff exactly repays what the option cost.

Enter the price at expiration, the strike and the premium per share, and the page returns two figures. The payoff is what the option itself is worth at expiry, max(price − strike, 0). Net profit subtracts the premium. With the stock at 120, a strike of 100 and a premium of 5, the call pays 20 per share and nets 15.

Everything here is per share and at expiration only. A standard US equity option covers 100 shares, so multiply by 100 for one contract. Before expiry an option also carries time value that depends on volatility, interest rates and dividends, which is a valuation problem this page does not attempt; commissions, taxes and early exercise or assignment are left out as well. Treat it as arithmetic for checking a trade, not a recommendation to make one.

What is call option calculator?

A call option's expiration payoff is the value, at the moment the option expires, of the right to buy the underlying at the strike price. It equals the final price minus the strike when that difference is positive and zero otherwise, because no holder exercises a right to pay more than the market price. Net profit per share is that payoff minus the premium originally paid. Both are in the currency the prices are quoted in, per share of the underlying.

How to use this calculator.

1. 01Enter the Underlying price at expiration: the stock's closing or settlement price on the expiry date, or any price you want to test.
2. 02Enter the Strike price from the option's description, such as the 100 in a '100 call'.
3. 03Enter the Premium paid per share, which is the quoted option price, not the contract total. Paying 500 for a 100-share contract is a premium of 5.
4. 04Read the payoff and net profit, then multiply both by the contract's share count, normally 100, and by the number of contracts you hold.
5. 05Rerun with several expiration prices, including one below the strike, to see the whole range of outcomes before trading.

The formula.

Payoff = max(S_T − K, 0) and profit = payoff − premium, where S_T is the underlying price at expiration, K is the strike and the premium is the per-share price paid for the option. The max function captures what makes an option an option: below the strike the holder simply does not exercise, so the payoff floors at zero rather than going negative. Above the strike it rises by exactly one for each one-unit rise in S_T. Setting profit to zero gives the break-even price, K + premium. The premium is spent at purchase, so it is subtracted whether or not the option finishes in the money, which makes −premium the worst possible result. All three inputs must be positive. Time, volatility and interest rates do not appear because at expiration an option has no time value left; only the gap between S_T and K remains.

A worked example.

Frequently asked questions.

References& sources.

1. [1]Options Clearing Corporation, Characteristics and Risks of Standardized Options.
2. [2]SEC Investor Bulletin, An Introduction to Options.
3. [3]BIPM, The International System of Units (SI Brochure), 9th ed., version 3.01, coherent derived units and quantity equations.