Here’s two sample scenarios to get a better feel for both… Call Options Profit Calculation Example (Strike price – Current market price) – Premium = Put option profit That’s because put buyers profit by buying at the price of the asset at the option’s exercise, then selling it for the strike price. Puts use a similar formula, with strike and current market prices flipped around. (Current market price – Strike price) – Premium = Call option profit With calls, you calculate the maximum profit by subtracting the options premium from your stock’s current market price. There are slightly different formulas for calls and puts. You just have to calculate trading fees (and taxes, if you’re diligent) to calculate your max upside.Īs an options buyer, you’ll need a formula to calculate your max profit. How to Calculate Max ProfitĪs an options writer, your premium is your maximum profit. Looking to delve deeper into options trading? Learn more about spread option trading and margin in options trading. Some strategies, like covering the calls you write and spread option trading, will minimize the risk of both.
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