Put Option Calculator
This put option calculator helps you analyze the potential profit, loss, and breakeven price of a put option trade. Select “Put” from the dropdown, enter your trade details, and view key metrics instantly. You also must set a custom chart range to estimate how your position would perform across the range of prices you believe the stock could realistically trade within by expiration.
How to Use the Put Option Calculator
Our put option calculator is designed to help you evaluate the risk and reward profile of a put option trade based on your inputs. Just enter a few key details and the calculator will generate important metrics instantly.
Follow these steps to use the calculator effectively:
- Enter the stock’s current price – This is the current market price of the underlying stock.
- Select “Put” as the option type – Make sure “Put” is selected in the dropdown menu.
- Input the strike price – The price at which the option allows the asset to be sold.
- Enter the premium – The cost paid (for long puts) or received (for short puts) to open the position.
- Select the position type – Choose whether you’re buying (long put) or selling (short put) the option.
- Enter the expiration date – This is when the option contract expires.
- Set the chart range – Define the range of stock prices you’d like to visualize on the profit/loss chart.
- View your results – The calculator will show key data like breakeven price, maximum profit, maximum loss, and the P/L chart.
Understanding Put Options
What Is a Put Option?
A put option is a financial contract that gives the buyer the right, but not the obligation, to sell a stock at a specified strike price before a certain expiration date. Traders use puts to speculate on downward price movement or to hedge long positions.
What Is a Long Put?
A long put involves buying a put option. It’s used when a trader expects the underlying stock to decrease in price. If the stock drops below the strike price, the value of the put increases.
- Profit increases as the stock price falls
- Maximum loss is the premium paid
- Used in bearish market outlooks
What Is a Short Put?
A short put involves selling a put option, typically when the trader expects the stock price to stay the same or rise. The seller earns the premium but takes on the risk of having to buy the stock if it falls below the strike price.
- Profit limited to the premium received
- Loss increases as the stock price drops
- Used in neutral to mildly bullish scenarios
What Is a Covered Put?
A covered put is a more advanced strategy where a trader sells a put option while also shorting the underlying stock. It’s a bearish strategy used when the trader expects the stock to decline moderately.
- Generates income from the put premium
- Hedges against a short position
- Limited use case compared to other strategies
What Is a Cash Secured Put?
A cash secured put involves selling a put option while setting aside enough cash to buy the stock if it gets assigned. It’s often used to potentially acquire stock at a lower price while collecting a premium.
- Premium is earned up front
- Stock is only purchased if it drops below the strike
- Used by income investors looking to buy quality stocks at a discount