The two formulas
At expiration an option is worth only its intrinsic value. A call is worth the stock price minus the strike (or zero); a put is worth the strike minus the stock price (or zero). Subtract the premium you paid per share and you have profit per share. Then multiply by 100, because one standard contract controls 100 shares, and by the number of contracts.
Call: profit/share = max(0, S - K) - premium. Put: profit/share = max(0, K - S) - premium. Total: profit/share x 100 x contracts. Memorize these and you can reconstruct every example on this page.
Worked example: long call
You buy 3 contracts of a $50 strike call for $2.00 per share. Cost = $2.00 x 100 x 3 = $600, which is also your maximum loss. Breakeven = $50 + $2.00 = $52. Now suppose the stock is at $60 at expiry. The call is worth $60 - $50 = $10 per share. Minus the $2 premium = $8 per share. Times 300 shares = $2,400 profit.
If instead the stock is at $48 at expiry, the call is worth $0 and you lose the full $600. Notice the asymmetry: the upside was $2,400 on a $600 risk in this scenario, which is why buyers accept that most options expire worthless.
Worked example: long put
You buy 2 contracts of a $60 strike put for $2.25 per share. Cost = $2.25 x 100 x 2 = $450 maximum loss. Breakeven = $60 - $2.25 = $57.75. If the stock falls to $50 at expiry, the put is worth $60 - $50 = $10 per share. Minus $2.25 = $7.75 per share. Times 200 shares = $1,550 profit.
The three mistakes that wreck the math
Mistake 1: forgetting the 100 multiplier. A $2 premium is $200 per contract, not $2. Every per-share number in these formulas must be multiplied by 100 before it means anything in dollars.
Mistake 2: mixing up per-share and total premium. If you paid $600 total for 3 contracts, the per-share premium is $600 / 300 = $2.00. Plug $600 into the per-share formula and every answer will be off by a factor of 100.
Mistake 3: treating the strike as the breakeven. You do not profit the moment the stock crosses the strike; you profit when it crosses the strike plus the premium (for calls). On the $50 call above, a $51 stock at expiry still loses $100: the call is worth $1, you paid $2.
Closing early: a worked example
You do not have to hold to expiry. Take the $50 call bought for $2.00 (3 contracts). One week later the stock is at $55 and the call trades at $6.20: $5.00 of intrinsic value plus $1.20 of remaining time value. Sell now and your profit is ($6.20 - $2.00) x 300 = $1,260.
Compare that with holding to expiry at $55: ($55 - $50) - $2.00 = $3.00 per share x 300 = $900. Selling early captured $360 of time value that would have decayed to zero. The trade-off is giving up further upside if the stock keeps running. Most retail option profits are taken this way, by selling back into the market, not by exercising at expiry.
Gains, losses, and keeping score
To calculate gains and losses across trades, record the premium paid (or received) per trade, multiply by 100 and contracts, and net them at expiry or when you close. Commissions and fees come off the top of each trade. Our free calculator runs the at-expiry math for any call or put in seconds, including the payoff chart.