Stock Option Calculator

HOW TO USE THIS CALCULATOR

StockOptionCalculator.com is a free stock option calculator. This quick and simple tool allows beginners to easily calculate potential profits and returns on trading options based on a future estimated stock price.

Steps:

Select call or put option
Enter the expiration date of the option
Enter the strike price of the option
Enter the amount of option contracts to be purchased
Enter the price of the option
Enter the current stock price
Enter the stock price that you think the stock will be when the option expires

A Beginner’s Guide to Stock Options

What is a stock option?

A stock option gives an investor the right to buy (or sell) stock at a specific price.

Why buy stock options instead of stocks (advantages of stock options)?

Stock options allow investors to use leverage and multiply their potential return (and loss).

Why buy stocks instead of stock options (disadvantages of stock options)?

Investors buying stock mainly consider whether the stock price will increase or decrease. Investors buying stock options have to consider not only whether the stock price will increase or decrease, but also at what magnitude and when. Getting any of these wrong could result in large losses, but getting all of these factors right could result in greater gains than buying just stock.

What are the different types of options for beginners?

Call Option (C) - Gives an investor the right to buy a stock at a specific price. Investors purchase call options if they believe the stock is going to increase.

Put Option (P) - Gives an investor the right to sell a stock at a specific price. Investors purchase call options if they believe the stock is going to decrease.

How to read options (stock option naming convention)

Ticker Symbol + Expiration Year + Expiration Month + Expiration Day + Call or Put (C or P) + Strike Price

Definitions

Expiration Date - The day when the stock option contract expires and is no longer valid after

Strike Price - The price that an investor can purchase (or sell) a stock regardless of what it is currently trading at

Contract - The right to buy (or sell) 100 shares of the stock

Exercise - To exercise a stock option is to choose to buy (or sell) the underlying shares at the strike price.

Example: If a stock is currently trading at $100, the owner of a $5 call option can choose to exercise the option and purchase 100 underlying shares for $5 for a profit of $95.