Buy Call Stock Options Calculator

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Description:

This app calculates the gain or loss from buying a call stock option. The gain or loss is calculated at expiration.

When purchasing a call option you are buying the right to purchase a stock at the strike price at a future date. This is a bullish trade as you are speculating the underlying stock price will increase.

If the price of the stock is greater than the strike price, the option buyer would use the right to purchase at the strike price. The option buyer can then immediately sell the option at the market price for a profit. On the other hand, the buyer can keep the shares.

If the stock price is less than the strike price the buyer would not use the right. In this case the buyer could simply purchase the stock on the open market at a lower price.

Note, this calculator does not take into account the commission paid to the stock broker.

Tutorial/Example:

This example will use a house instead of a stock to explain options. Most likely, this will be more easily understood than using stocks.

Scenario:
  1. You believe the value of a particular house with a value of $200,000 is expected to rise in the future.
  2. You do not want to purchase the house or do not have sufficient funds or credit for the purchase.
You approach the owner and talk about an option to buy the house in the future. You and the house owner agree to the following contract.
  1. The contract will expire 1 year from today.
  2. The selling price of the house will be $210,000.
  3. To enter the contract you have to pay the house owner $10,000.
  4. You can exercise the contract at anytime.
Good scenario:
After one year, the value of the house rises to $300,000. Therefore, you exercise your option to purchase house. You pay the owner $210,000. You then immediately sell the house for $300,000 making a $80,000 profit. Note, you have already paid the owner $10,000 to enter the contract ($300,000 - $210,000 - $10,000 = $80,000).

Bad scenario:
After one year, the value of the house only rises to $205,000. Therefore, you would not exercise your option. It would not make sense to pay $210,000 for a house valued at only $205,000. You would have lost $10,000. The amount you agreed to pay to enter the contract.

Note in either of the cases, the owner keeps your $10,000.

Since the contract allows you to exercise the option at any time, you could exercise anytime during the year. You might want to exercise the option if the price has spiked or peaked earlier than the one year expiration.

Calculation Instructions:

  1. Enter option strike price.
  2. Enter price per option.
  3. Enter stock price at expiration.

Inputs:

Parameter Description
Option Strike Price This is the price the option buyer has the right to purchase the stock. If the stock price at expiration is less than the strike price the option is worthless.
Price Per Option This is the price per a single stock option. Stock options are sold in contracts or lots of 100. In other words, the contract gives the option buyer the right to purchase 100 shares at the strike price.
Stock Price At Expiration This is the market price for a share of the stock at expiration. Expiration is the date the option contract ends. This is also known as expiry.

Outputs:

Parameter Description
Gain/Loss This is the amount of profit or loss at expiration. A positive value is a gain. A negative value is a loss.
Contract Cost/Net Debit This is the price paid to enter the contract. This is equal to the option price time 100, since contracts are sold in lots of 100.
Maximum Loss/Risk This is the largest amount of money you could lose. When buying call contracts this is equal to the contract cost.
Maximum Gain/Return This is the largest amount of money you could earn. When buying call contracts there no limit to the upside.
Break Even Stock Price This is the value the underlying stock price needs to achieve to not have a loss. This is equal to the strike price plus the contract cost

Disclaimer:

Use this calculator at your own risk. This calculator may or may not be accurate or reliable. By using this calculator you acknowledge any reliance on this calculator shall be at your sole risk. This page is for educational purposes only. It does not provide investment advise.

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