1. What is Option Profit?

Option profit is the net gain or loss from an options trade, calculated as the difference between the premium received and the cost, multiplied by the contract multiplier.

2. How Does the Calculator Work?

The calculator uses the option profit formula:

Where:

• \( Premium\ Received \) — Amount received for selling the option ($)
• \( Cost \) — Cost basis of the option position ($)
• \( Multiplier \) — Contract multiplier (typically 100 for standard options)

Explanation: This formula calculates the total profit by first determining the net profit per share and then scaling it by the number of shares per contract.

3. Importance of Option Profit Calculation

Details: Calculating option profit is essential for evaluating trade performance, risk management, and making informed trading decisions.

4. Using the Calculator

Tips: Enter the premium received per share, cost basis per share, and contract multiplier. All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical option contract multiplier?
A: Standard equity options typically have a multiplier of 100, representing 100 shares per contract.

Q2: How do I calculate profit for multiple contracts?
A: Multiply the result by the number of contracts traded, or include the total position size in the multiplier field.

Q3: Does this work for both calls and puts?
A: Yes, the same formula applies to both call and put options.

Q4: What if my cost is higher than the premium received?
A: The result will be negative, indicating a loss on the trade.

Q5: How should I account for commissions?
A: Include commission costs in your total cost basis for accurate profit calculation.