Finance Calculators ▶ Options Profit Calculator
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The options profit calculator calculates the option profit margin of an option contract in the stock exchange. Traders utilize the option contract to estimate the future price of an asset so that a handsome profit could be earned after a certain trade ends.
The option contract is a derivative or estimation and its value is derived from another asset like stocks, commodities, or Exchange Trade Funds (ETFs). You can estimate the profit margin for a call or put options with the options contract calculator to make your sale or purchase of the share a profitable one.
An option contract is classified into two classes:
A call option reserves a right to the trader, but not a compulsion to purchase a stock at a specific price(strike price) over a period of time
A put option reserve a right to the trader, but not a compulsion to sell a stock at a specific price(strike price) over a period of time
The price of the share dividend fluctuates on the basis of market trends. You need to use the option price calculator to decide about the call or put the option of the shares.
There are various terms used in the option strategy that is essential to understand for a profitable stock transaction.
The share price is the price of one share of all the saleable equity shares of the company. The share prices actually fluctuate over a period of time due to changing market conditions. The share price of a company varies on the basis of the performance of the company. Companies do define their share price on the basis of Base Point.
The strike price is the price of the share at which the buyers and seller mutually agreed to trade an option. The strike price may be more or less than the market price of the share. It is critical to identify the strike price while trading the shares. It is best to use the options profit loss calculator before estimating the strike price of a particular share.
The option price is the premiums and it is the difference between the current share price and strike price. To find an optimal intrinsic value of the option use the stock options calculator to identify the profit/loss in the share transaction.
One option trade is called a contract and each option represents 100 shares of the underlying stock. Estimating the number of the contract once to be traded should be calculated by the options profit calculator.
Suppose the Share price of the XYZ trading company is $50 and the option price is $1. You are aiming to purchase the 5 contracts of the call option (each contract is 100 shares). The strike price is around $60 and the share price has risen to $70 since you purchased the shares. The profit margin can be calculated as:
The total cost = (option processed) (Number of contracts)
The total cost = ($1) (500) = $500
Current stock value = (500) ($70)
Current stock value = $35000
Strike Price = 500 x $60
Strike Price = $30,000
Option Profits = Strike Price –Current stock value – Cost = 30000-35000 – 500
Option Profits = $-5500
For making a profitable stock option, just follow the steps when using the profit loss calculator.
From the source of economictimes: Stock Option Profit, Options Profit Loss
From the source of investopedia.com: Profit With Options,Option Profitability