The payoff
At expiry an option is worth its intrinsic value and nothing else:
call intrinsic = max(0, price − strike)
put intrinsic = max(0, strike − price)
bought: profit = intrinsic − premium
sold: profit = premium − intrinsic
Multiply by contracts and by the shares each contract represents — 100 on US equity options, though this is a field rather than an assumption because index and non-US contracts differ.
A $100 call bought for $3.20 with the underlying at $112 finishes with $12 of intrinsic value: $8.80 per share, $880 on one contract.
Break-even is not the strike
The premium has to be recovered before anything is profit:
- Call: break-even = strike + premium
- Put: break-even = strike − premium
That $100 call is only profitable above $103.20. Being right about direction and finishing at $102 still loses money — the option expired with real value and less value than it cost. This is the most common surprise for people new to options, and it is why the break-even row sits directly under the result.
The asymmetry that decides everything
The four positions have completely different risk shapes, and this matters more than any refinement:
| Position | Maximum loss | Maximum profit |
|---|---|---|
| Long call | premium paid | unlimited |
| Long put | premium paid | strike − premium |
| Short call (naked) | unlimited | premium received |
| Short put | strike − premium | premium received |
Selling options collects a small, high-probability premium and accepts a large, low-probability loss — the same payoff shape as a martingale, arrived at differently. That is not an argument against it; sold premium is a legitimate strategy run by serious people. It is an argument for knowing which side of that trade you are on, which is why the calculator returns the word "unlimited" rather than a number when it applies.
What this page deliberately does not do
It prices nothing before expiry. Between now and expiry an option also carries time value and volatility, so a contract can look profitable on this payoff and be losing in your account today — or the reverse. A long call that is right about direction but slow can lose money to time decay while the payoff chart says it is winning.
It ignores the Greeks, assignment risk on short positions, and early exercise on American-style contracts.
Use it to understand the shape of a position and its boundaries. For the range the market is currently pricing, the expected move calculator uses implied volatility to answer a different and complementary question.