Options profit calculator robinhood9/28/2023 Strike price of a put option: The strike price definition is the same here but for a different purpose. When both stock price and strike price are the same, we say the call option is at the money. Note that even if the underlying asset's current price is equal to the strike price, you will incur a loss due to call option costs. If the stock's current price is below the strike price, we say your option contract is out of the money.Ĭall potential profit: Refers to the profit you could make for the operation minus call option costs, expressed in percentage.Ĭall potential return: Refers to the profit you could make for the operation minus call option costs, expressed in your currency. This amount is also known as your capital at risk. Total call options cost (the premium): Represents the total investment you will make for getting your desired amount of option contracts. That means that if you buy four call option contracts, you get the right over 400 call options thus, 400 shares of the underlying asset. Remember that each contract represents 100 call options. Price of the call option: Option contracts have their own price/cost, which changes accordingly to market dynamics such as market positive or negative expectations, remaining time to contract option expiration, etc.Īmount of options contracts: Refers to how many contracts you are going to buy. If the current price is above the strike price, we say the call option is in the money. Then the new owner of the shares could sell them for a profit if they want. In other words, the call owner has the right (but not the obligation) to buy the underlying asset shares from the option writer at the strike price, regardless of the current market price. Strike price of a call option: The strike price definition refers to the predetermined asset price, let's say stock, at which, if the market price of the underlying stock goes over the agreed price, the call option can be executed. You can use our call option calculator to see the profits considering the current underlying asset price in the market, or you can calculate your possible profits if you have a target price in mind. put option scenarios.Ĭurrent price and target price: These are the underlying asset prices from which the call option derives its value. We will explain what each variable means in our put call option calculator and what it means to be "in the money," "at the money," and "out of the money" in the call vs. Similarly, our put option calculator can also be named a long put option calculator.īefore we explore how to calculate call options profit, we must review the terminology used in an option contract. In other words, you would be able to sell your shares at a higher price than the current stock market price if you are long in the put option. In that sense, our call option calculator can also be named a long call option calculator.Ī put option gives the owner, i.e., the one who bought the option contract, the right (but not the obligation) to sell at a predetermined price over a given period of time, regardless of the current market price of the stock.Ĭontrarily to the long call option strategy, in the put option, you expect the price to fall below the agreed fixed price so you can sell the shares at this price and cover yourself in case the market stock price keeps falling. The buyer is considered to be long in the call option. This way of action implies a bullish view of the asset (you expect the asset price to increase). You have two option contracts class: a call option and a put option.Ī call option gives the owner, i.e., the one who bought the option contract, the right (but not the obligation!) to buy a stock at a predetermined price (see What is the strike price? in the FAQ section), over a given period of time, regardless of the current market price of the stock.Īs you can see, the utility of a call option for the buyer is that it can get shares of a stock for a reduced price compared to the market and then sell the call option for profits. Traders (not necessarily investors) use option contracts to speculate about future asset's price movement. It is important to mention that the asset from which the option contract derives its value is known as the underlying asset. An option contract is a derivative, meaning that its value is derived from the value of another asset for example, stocks, commodities, or market index ETFs.
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