AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |
Back to Blog
Stock profit calculator app8/1/2023 Now here let’s assume that your share market prediction goes in your favor and the stock price reaches ₹2900, thus you now have the right to buy 100 shares of Reliance at ₹2040 and selling those shares in the open market at ₹2900 per share thus making a profit of ₹860 per share. Now since you are bullish on the particular stock, you paid the premium of ₹20,000 (₹200*100 shares per lot) to buy one lot of Reliance shares. A call option strike price of ₹2040 expiring in the month is available at ₹200. Suppose the stock of Reliance company is trading at ₹2000. To get a clear view of the profit one can earn with call option trade, let’s take an example. Profit= Price of underlying asset-Strike Price-Premium Amount Price of Underlying Asset >= Strike Price of Call + Premium Amount When the price of the underlying stock is more or equal to the strike price, then profit is calculated by adding long call and premium paid. Now to calculate the profit you can use the formula below: Here the breakeven point is the sum of strike price and premium paid.īreakeven Point= Strike Price+Premium Paid Other than this the value of strike price and premium defines the breakeven point that eventually helps you to calculate the exact profit you can make with the trade. how much risk you can take to trade in a particular call option trade. To get the exact idea of the call option profit calculation, you have to consider various parameters like the risk appetite i.e. Other than this there is a Call Option profit calculator that further helps you in gaining the right knowledge and understanding call option profit. Now understanding profit percentage, it is a little challenging to predict, because of no limit of how much the stock price can rise at expiration.īut on the basis of analysis and other parameters, you can actually get an idea of how much you can earn in call option trade. If you are thinking that you can sell the call option without strike price, then that is not possible in real life. How to Calculate Long Call Option Profit ?Ī long call option is bought with the objective that the price of the underlying asset will rise beyond the strike price before expiry. Thus, the call option writer profit is the premium he or she received while writing a call opt1ion. On the other hand, the call option writer is the one who makes a profit if the underlying asset price is less than the strike price. Although here the exact profit depends on the difference in the stock price and the strike price on the date the option expires. In general, a call option buyer can earn profit only if the stock price rises above the strike price before expiry. The amount of premium usually fluctuates based on the amount of the risk and time left for option expiry. So here, the maximum loss one can suffer is the premium amount he gives while buying a call option. In case, the trader does not choose to exercise his right he will not get the reimbursement of the premium he paid while buying a contract. That is why to earn profits, you must know when to sell call option? Since here the trader has an option, so he exercises the trade only when the value of the asset reaches the strike price or at the value where he can earn a good profit. When a trader buys a call option, he has an idea of the loss he can suffer from the trade. Let’s dive in to learn the proper method to determine call option profit. So, if you are bullish on a particular stock but at the same time want to minimize losses you might suffer due to high volatility and fluctuation in stock price.Īlso Read: Spot Price and Strike Price and Pros and cons of Option TradingĪlthough stock analysis is important and can prevent you from facing loss but picking the right strike price and gaining a proper understanding can help you in calculating call option profit. If you are thinking of investing in options contract then learn how to calculate profit on the call option.īefore digging deep, let’s first learn about what the call option is?Ī call option is a type that gives an investor a right but not an obligation to buy a particular asset at a fixed price at a predetermined date in the future. It offers high leverage and at the same time gives investors a chance to earn a good yield. Options trading, although complex but is the most exciting component of investment.
0 Comments
Read More
Leave a Reply. |