Break-even at expiration
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Calculator · Options
Options break-even calculator
Choose a call or a put, bought or sold, then enter the strike, the premium per share, the contracts and a price at expiration. The options break-even calculator returns the break-even, the most the trade can lose and make, and the result at that price.
Maximum loss
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Maximum gain
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Profit or loss at your price
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The working
Where the break-even comes from
A bought call pays at expiration once the stock clears the strike by more than the premium. Strike plus premium is the break-even: a $45 call bought for $2.30 needs the stock at $47.30 just to recover the cost. A put is the mirror, strike minus premium. The seller's break-even is the same price seen from across the trade, since every dollar one side makes at expiration the other side loses. Premiums are quoted per share and a contract covers 100 shares, so the $2.30 call costs $230. At $50 at expiration it is worth $500, a $270 profit. Option break-even price goes further into reading it off a chain.
Maximum loss and maximum gain
A buyer can lose the premium and no more. A bought call has no ceiling on the gain. A bought put does best with the stock at zero, which pays strike minus premium, times 100 shares per contract. On the default call, the most at stake is 30, and every dollar the stock finishes above 7.30 adds 00 per contract. Sellers take the other side of each case. The premium is the most a seller can make. A sold put loses strike minus premium per share if the stock goes to zero, which is why brokers want margin or cash set aside against it; naked put and selling puts on margin cover that requirement and how it grows as the stock falls. A call sold on stock you don't own has no limit on the loss, shown as "No limit".
What the calculator leaves out
Every figure is at expiration. Before then an option's price includes time value and implied volatility, so a bought call can show a gain while the stock is still under the break-even, and time decay can leave it showing a loss with the stock above the strike. Commissions and fees are left out. Options on US stocks can generally be exercised early, and a short call assigned the day before an ex-dividend date can change the result. Check the contract's multiplier as well. Whether the trade needs a margin account at all is answered in do you need a margin account to trade options.
Questions about this calculator
Is the break-even the same before expiration?
Only at expiration, when nothing but intrinsic value is left. Before that the option also carries time value, which shrinks as expiration approaches and moves with implied volatility, so the stock price that returns your premium on a given day can sit well away from strike plus or minus premium.
Why does a sold call show no limit on the loss?
A stock has no upper bound on its price. A call seller who does not own the shares owes the difference between the stock and the strike at expiration, however high the stock goes, less the premium received. Owning the shares, a covered call, caps that loss, because the shares can be delivered.
How many shares does one option contract cover?
A standard US equity option covers 100 shares, so a premium quoted at $2.30 costs $230 a contract. After a split, merger or special dividend the Options Clearing Corporation can adjust contracts, and an adjusted contract may deliver a different number of shares or cash. Check the deliverable before trading one.
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