How it works
At expiry, an option is worth only its intrinsic value, as the intrinsic and time value lesson explains. The calculator works out each option's result at expiry and adds them up:
Call intrinsic value = larger of (price − strike) and 0
Put intrinsic value = larger of (strike − price) and 0
Buyer's result = intrinsic value − premium paid
Seller's result = premium received − intrinsic value
The total is multiplied by the quantity: the lot size times the number of lots. The chart draws the result for a range of prices at expiry, marks each strike and the breakevens, and highlights the price you choose to check. The table below it gives the same results as numbers.
Because a payoff at expiry is a straight line between strikes, the calculator can tell whether the gain or loss keeps growing as the price rises. When it does, it says so: "no fixed limit".
Worked example
Worked example: Buying and selling the same made-up call
Strike ₹1,000, premium ₹30, quantity 500 (a made-up lot size).
| Premium paid by the buyer: 30 × 500 | ₹15,000 |
|---|---|
| Breakeven at expiry: 1,000 + 30 | ₹1,030 |
| Buyer's result if the price ends at ₹1,100: (100 − 30) × 500 | +₹35,000 |
| Buyer's maximum loss | ₹15,000, the whole premium |
| Seller's result at ₹1,100 | −₹35,000 |
| Seller's maximum loss | no fixed limit |
Switch "Buy or sell" to "Sell (write)" in the calculator to see the seller's side: the same numbers with the signs reversed, and a loss that keeps growing as the price rises.
Worked example: A made-up bull call spread
Buy the ₹1,000 call for ₹40 and sell the ₹1,100 call for ₹12, quantity 500.
| Net premium paid: (40 − 12) × 500 | ₹14,000 |
|---|---|
| Breakeven: 1,000 + 28 | ₹1,028 |
| Maximum gain: (100 − 28) × 500 | ₹36,000 |
| Maximum loss | ₹14,000 |
Selling the higher call lowers the cost and caps the gain, so both extremes are known in advance, at expiry.
Limitations
- Results are at expiry only. Before expiry, option prices also move with time decay and implied volatility, as the time decay and vega lesson explains, and a position can be closed early at a different result.
- Margin calls are not shown. Option sellers must post margin and can be forced out before expiry, as the risks of buying and selling options lesson explains.
- Costs, taxes and slippage are not included, and they move every breakeven further away.
- Settlement is not modelled. Some contracts settle by delivery of the underlying, as the expiry and settlement risks lesson explains.
Derivatives can lead to rapid and substantial losses, sometimes larger than the money put in. This calculator shows how payoffs work; it is not a suggestion to trade options.