How to Calculate Options P&L

What is Options P&L?

Options give the right to buy (call) or sell (put) an asset at a fixed strike price. Profit at expiry depends on stock price movement relative to strike, minus the premium paid.

Formula

Call profit = (Stock price − Strike − Premium) × 100 if ITM; Put profit = (Strike − Stock price − Premium) × 100 if ITM; Loss capped at premium paid

S: Stock price at expiration (Currency per share)
K: Strike price (Currency per share)
P: Premium paid (Currency per share)
Qty: Contract size (100 shares per contract)

Step-by-Step Guide

1Call profit = max(0, Stock−Strike) − Premium
2Put profit = max(0, Strike−Stock) − Premium
3Breakeven call = Strike + Premium
4Maximum loss = premium paid

Worked Examples

Input

Call: Strike $100, Premium $5, stock $115

Result

Profit = $10/share ($1,000/contract)

Frequently Asked Questions

What does "in the money" mean?

Call: stock > strike. Put: stock < strike. ITM = has intrinsic value. OTM = no intrinsic value, only time value. Exercise decision depends on whether ITM at expiry.

Is my loss capped at the premium?

On long options (buyer), yes. Loss max = premium paid. On short options (seller), loss is unlimited (calls) or large (puts). Never short options without stop losses or understanding max risk.

How does time decay affect profit?

Longer-dated options worth more. As expiration approaches, time value erodes. Buyer loses if stock doesn't move; seller benefits. For 45+ days to expiry, time decay is slow; under 7 days, rapid.

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