Calculate your exact payout, risk, and break-even price at expiration.
Options contracts give you the right, but not the obligation, to buy or sell a stock at a specific price (the Strike Price) on or before a certain date. Because one standard options contract controls 100 shares of the underlying stock, options allow traders to leverage small amounts of capital for massive potential gains.
Call Options: You buy a Call when you believe the stock price will go UP. Your profit is theoretically infinite if the stock skyrockets, but your maximum loss is strictly limited to the premium you paid.
Put Options: You buy a Put when you believe the stock price will go DOWN. You make money as the stock price crashes below your strike price.
Your break-even point is the stock price at which your trade makes exactly $0. For a Call option, the stock must rise past your strike price plus the premium you paid. For a Put option, the stock must fall below your strike price minus the premium you paid.