Long call: unlimited upside, capped loss
You pay a premium upfront for the right to buy at the strike price. Break even when the stock exceeds strike + premium. Everything above that is profit. Max loss is the premium you paid, no matter how low the stock goes.
- • Bullish bet; time decay works against you
- • Best when you expect a fast, large move up
- • Bought too far out of money = low win rate but big payouts
Long put: hedge or bearish bet
Pay a premium for the right to sell at the strike. Profit as the stock drops below (strike − premium). Common uses: portfolio hedge (protective puts) or straight bearish speculation.
Covered call: income against stock you own
You already own 100+ shares. Selling a call above current price collects a premium immediately. If the stock stays below strike, you keep both shares and premium. If it rises above strike, shares are called away at the strike (capped upside). Popular for generating 5–15% annualized on blue-chip holdings.
Related guides
Long-form playbooks on the same topic, written by the RevenueLab editorial team.
FAQ
How do I calculate profit on a call option?
Profit = (Stock price at expiry − Strike) × 100 × contracts − Premium paid. If negative (stock below strike), your loss is capped at the premium.
What is the breakeven on a call option?
Strike price + premium per share. A $105 call bought for $3 breaks even at $108. Below that, you lose money at expiration; above, you profit.
What is the breakeven on a put option?
Strike − premium. A $95 put bought for $2 breaks even at $93. Profit grows as the stock falls further below $93.
How much can I lose on an option?
For long calls and long puts (buying): max loss is the premium you paid — nothing more. For short/covered strategies, losses can be much larger (up to the full stock value on covered calls). Naked selling has unlimited risk — not modeled here.
Does this account for time decay (theta)?
No — this calculator shows P&L at EXPIRATION only, using intrinsic value. Before expiry, options prices also reflect time value (theta) and implied volatility (vega). Use a broker's Greeks calculator for pre-expiry P&L.
How does a covered call work?
You own 100+ shares of a stock and sell a call option against them. You collect the premium immediately. If the stock stays below the strike at expiry, you keep the shares and premium. If it rises above, your shares are 'called away' at the strike price — you profit but cap the upside.
What's the difference between American and European options?
American options can be exercised any time before expiry (most US equity options). European options only at expiry (most index options like SPX). This calculator shows P&L at expiration — the same for both.
Are option profits taxed differently?
Yes — most equity options are short-term (held under a year), taxed as ordinary income. Broad-based index options (SPX, NDX) get 60/40 treatment: 60% long-term, 40% short-term regardless of holding period. Consult a tax pro.
How this calculator is built
Independently maintained
Written by Sam Doshi and the RevenueLab editorial team. We don't sell the data feeds this tool is built on.
Sourced from primary data
Benchmarks come from public AdSense / Stripe / IRS disclosures and reader-submitted data — never third-party "$X per view" claims. Full methodology.
Last reviewed
July 2026. We re-check every figure on the platform on a rolling quarterly cycle.
Editorial standards
See our editorial policy and disclaimer. Results are estimates, not advice.