Section
Options
Option contracts with the arithmetic laid out: where a trade breaks even, what a broker holds against a sold option, and how to size a position whose worst case is known in advance.
Buying an option risks the premium and nothing more. Selling one is a different arrangement: the broker holds a margin requirement against the position, the requirement changes as the stock moves, and an uncovered position can lose far more than the premium collected. Know which side of that line a trade sits on before you place it.
The options break-even calculator gives the break-even price, the maximum loss and the profit at a target price for a bought or sold call or put. Account approval levels and the requirement for each strategy are set by your broker within the rules of FINRA and the options exchanges, so check both before trading anything beyond a bought contract.
Columns
All columns →Versus
A Deep In-the-Money Call Can Do a Margin Loan's Job, at a PriceFor a defined holding period a deep in-the-money call caps the loss and may cost less than a margin loan; for open-ended holding, shares win.
Ledger
Selling Puts on Margin: The Requirement Moves Against YouSize short puts by the cash it takes to buy the shares, never by the margin requirement, which is lowest exactly when it matters least.
Rulebook
A Defined-Risk Spread Still Needs a Position SizeA defined-risk spread is sized by its maximum loss against a fixed share of the account, never by the income you want from it.
Answers
Concepts
- Naked put
A short put held in a margin account without cash set aside for the full purchase at the strike, secured instead by a margin requirement that moves with the stock.
- Notional value
The total value of the underlying shares an option or other derivative position controls, found by multiplying the number of contracts by the contract multiplier and the share price.
- Option break-even price
The underlying stock price at expiration at which an option's payoff equals the premium paid, so the buyer neither gains nor loses.
Calculators
- Options Break-Even Calculator
Break-even price, maximum loss and profit at a target for a bought or sold call or put.