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It helps you determine the likelihood of a strategy reaching certain price levels by a set date, using a normal distribution curve. You can also view the numerical probability of reaching a specific target, above and below the current price, by expiration. To do this, move the vertical slider bars with your mouse or enter prices for the lower and upper targets shown in the yellow boxes below.

All option pricing inputs can be changed. This allows you to view the price levels and probabilities that are most important to you.

Options profit calculator

For example, you can edit the default implied volatility, dividend yield and interest rate settings to see how this might affect the outcomes, both numerically and graphically. The maximum gain for long calls is theoretically unlimited regardless of the option premium paid, but the maximum loss and breakeven will change relative to the price you pay for the option.

These values are automatically calculated for many other option strategies, too, although the formulas are different. These probability calculations will change if you alter the lower and upper targets by either moving the slider bars with your mouse, or by typing in specific values for the lower target and upper target.

The profit and loss calculations shown in the blue box above for the date of entry orange linethe half-way point blue lineand expiration purple line are estimated assuming the price of the underlying stock remains unchanged from its current level.

In this example, the calls are out of the money initially so notice how the loss increases as time elapses toward expiration; this is due to time value erosion. To update pricing inputs, click on the "Refresh" button at the bottom of the tool.

If you would like to forecast the probabilities of the underlying stock reaching a different price on the various dates displayed, place your cursor anywhere on the chart and hold down the left mouse button.

Call Options Profit, Loss, Breakeven - Online Trading Concepts

As shown in the pink circle below, this will display the probability of the option reaching that price at any time between now and expiration "Prob.

Touching" as well as the probability of the option reaching a certain price level at expiration "Prob. In addition, you can easily make the following calculations, which many option traders find useful:. As shown below, if you would like to zoom in on the distribution curve, you can choose a closer date for the "Probability" calculation shown in the red box below.

This is helpful because it separates the visual profit and loss lines for the various dates. This will also cause the probability calculations shown in the pink box below to be oriented to the new date you selected, rather than the expiration date of the option default setting.

As shown calculate maximum profit call options, you can even turn calculate maximum profit call options any of the various visual displays the normal distribution curve in this example by simply clicking on the colored box next to the date. In my next article, I'll go into more depth and cover additional functionality in analyzing specific option strategies. All stock and option symbols and market data helsinki vantaa forex above are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security.

Learn more about Schwab Trading Services. Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the options disclosure can i own individual stocks in a roth ira titled Characteristics and Risks of Standardized Options before considering any option transaction.

The Basics of Options Profitability | Investopedia

The Trade and Probability Calculator provides calculations that are hypothetical in nature and do not reflect the actual investment results or guarantee future results.

The calculations do not consider commissions or other costs, and do not consider other positions in your account s for which a specific trading scenario is being examined. Rather, these values are based solely on the individual contract andrew frazer stockbroker perth pair of contracts in this specific trade.

In addition, the calculations incorporate annualized dividend yields and do not consider ex-dividend dates, early assignment, and other risks associated with option trading. If an option expires before the estimated date, it is treated as though it expires on the estimated date.

Past performance is no indication or "guarantee" of future results. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice.

Commissions, taxes and transaction costs are not included in this discussion, but can affect final outcome and should be considered.

Please contact a tax advisor for the tax implications involved in these strategies.

The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. Examples are not intended to be reflective of results you can expect to achieve.

Using protective puts will increase your cost basis in underlying securities. The information presented does not consider your particular investment objectives or financial situation including taxesand does not make personalized recommendations. Any opinions expressed herein are subject to change without notice.

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Managing Director of Trading and Derivatives, Schwab Center for Financial Research. Key Points Visualize your maximum gain, maximum loss and breakeven prices on an option strategy. Calculate the probability of a stock reaching a certain level by a certain date. Please try again in a few minutes. Important Disclosures Options carry a high level of risk and are not suitable for all investors.