Options Education

How to Calculate Options Profit and Breakeven

Mastering the math of expiration outcomes for calls and puts.

Fundamental Wording

Before calculating profit, you need to understand three numbers:

• Premium: The price you pay (or receive) per share for the option.
• Strike Price: The price at which you can buy/sell the stock.
• Multiplier: 1 standard equity option represents 100 shares.

Calculating the Breakeven Point

The breakeven is the stock price where your profit is exactly $0 at expiration.

Call Options

Formula: Strike Price + Premium Paid

Put Options

Formula: Strike Price - Premium Paid

Max Profit vs. Max Loss

For Long Calls and Puts, your max loss is 100% of the premium paid. Your max profit is theoretically unlimited for calls, and capped for puts (as a stock can't go below $0).

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