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"How To Calculate Options Profit and Loss in Percentage?"

Question By Kelly

"How To Calculate Options Profit and Loss in Percentage?"

Hi, I'm newbie in options trading. I would like to learn about options trading and get my financial freedom. I hope you can help me to answer the below: how to calculate the profit/loss in percentage? The example given are all in hundred based (mean % x 100) . example: i bought $40 call at trading $1.25. The share now trade at $40. after one week, it move up to $44.50. how much the profit (in %) i gain? can you show be the formula?

Asked on 2 April 2009

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Answered by Mr. OppiE

Hi Kelly,

Learning about options before committing real money into options trading is the correct approach to options trading and the reason why exist. I hope you will benefit greatly from

Calculating profit in loss in terms of percentage in options trading is really the same as calculating profit and loss of any other investments. It is simply a function of the profit returned versus the amount of capital that was invested.

From your example, if you bought at the money $40 strike price call options on a stock trading at $40 and the stock moves up to $44.50 after a week, your call options would probably be worth about $5.00 now. Since you bought those call options at $1.25 and is selling them for $5.00 now, you made $5.00 - $1.25 = $3.75. Therefore, your profit in terms of percentage would be: $5.00 - $1.25 = $3.75 / $1.25 = 3 or 300%. Its that simple.

In conclusion, to calculate your % gain from an options trade, all you have to do is to take the net profit or loss and divide it by the capital committment into the position will do.

Response by Kelly...

Hi Mr. OppiE,

Thanks for your answer. it help me to understand more. Thanks!

Reply by Mr. OppiE...

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