Archive · 22 Aug 2026
How Option Profit and Loss Work at Expiry
An option is a contract connected to the price of something, such as a stock.
A call option benefits when the stock price rises above its strike price.
A put option benefits when the stock price falls below its strike price.
In the example, the call has a strike price of ₹100 and costs ₹10.
If the stock ends at ₹120, the option is worth ₹20 at expiry.
After subtracting the ₹10 cost, the buyer makes ₹10.
The buyer breaks even when the stock reaches ₹110.
If the stock ends at ₹105, the buyer loses ₹5.
Before expiry, factors such as time remaining and implied volatility can change the option’s price.
A call option’s expiry value is the underlying price minus its strike price, while a put’s value works in reverse.
A ₹100-strike call bought for a ₹10 premium is worth ₹20 if the underlying closes at ₹120.
After subtracting the ₹10 premium, the example produces a net profit of ₹10.
The call breaks even at ₹110; closing at ₹105 would result in a ₹5 loss.
Before expiry, option prices are also affected by time to maturity and implied volatility.
- Who
- Option buyers, including the buyer of the example call option.
- What
- The article explains how to calculate option value, profit, loss, and break-even price at expiry.
- When
- At expiry; the article was published on August 22, 2026.
- Where
- Not specified.
- Why
- To explain how an option’s expiry payoff differs from its premium-adjusted profit or loss.
- Example call strike
- ₹100
- Call premium paid
- ₹10
- Underlying price at expiry
- ₹120
- Option value at expiry
- ₹20
- Net profit in example
- ₹10
- Call break-even price
- ₹110
- Maximum loss for call buyers
- The premium paid