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Using an options profit calculator can be a major benefit for any investor. It can help you determine the value of your portfolio in today's ever evolving market and provides a simplified way to view the profit or loss of your stock options strategy.

To become more familiar with stock options and how to use this calculator to predict your investment risk, check out our FAQ below. We also take a closer look at what goes into a stock options contract and how options stack up against regular stocks.


What is an options profit calculator?

The good news about trading stock options is you don't have to do all the math yourself.

Deciding whether an option is worth the risk requires figuring out a few things:

  1. The primary (or current market price) of that company's shares
  2. The total amount you risk losing
  3. The amount you can safely estimate to profit based on that company's history

That's where an options profit calculator can be useful to you.

Luckily, there are formulated ways to help you figure out the max amount you can lose on an option. While no one can perfectly predict the stock exchange, this calculator can also help estimate your potential profit.

Option profit calculators like this one are easy to use and provide clear information to help you make an informed decision.

What are stock options?

To understand stock options, you first need to understand what buying stock means.

When you buy stock in a public company, you are investing in that company's growth. Typically, people only invest in companies they believe are going to significantly rise in profit over the course of several years.

After that company's profits and the value of your share grows enough, you can sell your stock and get back more money than you originally spent. Now, diving into time-sensitive stock options is where things get interesting.

How Do Stock Options Work?

Buying stock options is the same concept as buying regular stock-- with a catch. You have a very limited time to buy or sell options.

Depending on the stock options you choose, you might only have a few days to study the company you've invested in to predict whether share value will rise or fall. This means options trading tends to be more flexible and hands-on than standard stocks.

Still can't decide whether stocks or stock options are for you? Let's look over some stock option examples.

What is an example stock option contract?

Investing in stock options starts with agreeing to a stock option contract.

The term "contract" in this case seems intimidating. You're not legally obligating yourself to buy shares at the contract price, you're simply showing interest in that stock option.

To agree to a stock option, you pay the current market price of those shares. Any time before the date listed on the contract, you can buy those shares at the strike price mentioned in the contract-- no matter how much they're actually worth.

The goal is to enter contracts that let you buy shares for cheaper than what they rise to be worth by the expiration date.


You're presented with a call option to buy 100 shares in RandomCompany X (RCX).

The strike price is $100 per share for the next 3 months.

The expiration date for you to make your decision to buy or not is 3 months. The current premium for shares at RCX is $75.

Hang on, there are some unfamiliar words here. Let's break this down a little more.

Put Option vs Call Option

There's some unique terminology involved in trading stock options:

  • Expiration date - The time limit put on an option contract
  • Strike price - The price of the shares in the contract
  • Call option - An offer to buy shares, in the hopes those shares will be worth more by the expiration date
  • Put option - An offer to sell shares at a pre-determined price. If you have shares of a stock, put options shield you from any losses below the strike price.
  • Premium - The current market price of a company's shares and the amount you pay for the rights to a stock option

You profit when the shares you've bought become worth more than the strike price you agreed to. If you can estimate how quickly a company's shares will increase in value, winning small profits isn't that difficult.

Are options safer than stocks?

Well, that depends. Options have gotten a bad rap over the years simply because most people are intimidated by them.

They move faster than regular stock investments and require more involvement. If you have no interest in educating yourself or spending more time keeping track of your investments, you're better off with traditional shares in equity.

However, if you do take the time to get good at understanding options, there are some big advantages. You have more choices in creating a strategy for options trading. And trading options well can actually be less risky than equity because of how flexible options contracts are.

So if you can't decide between long-term shares and stock options, you don't have to. Try out both, and see which you prefer. The one you like learning about the most is the right one for you.

Hopefully, you enjoyed this overview of stock options. We encourage you to do plenty of your own research as well.

Good luck!

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