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I have 1 contract of a CALL OPTION of a XYZ stock. The strike price is $155. The purchase price is $15. The Expiration is Jan 3 2020. The current price of the stock is $161. I paid $1515 for owning them.

I'm looking for the equations to calculate the profit/loss in the following scenarios. In each of the scenario, I would like to sell the 1 contract of the CALL OPTION and keep profit/loss.

  1. On January 2nd (a day before the expiration), the stock price is $175.
  2. On January 2nd (a day before the expiration), the stock price is $157
  3. On January 2nd (a day before the expiration), the stock price is $150
  4. On December 20th, the stock price is $150. I speculate that the stock can go low further.
  5. On December 20th, the stock price is $175. I want to take the profit.
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    You’ll need to provide what you expect the option value to be for each scenario. Or are you asking what the option will be worth in each scenario? – FrankRizzo Dec 1 '19 at 3:54
  • I bought 1 contract of the CALL OPTIONS and sell the same CALL OPTIONS in those scenarios and find out how much profit I can make or how much I can lose? I have heard about time decay, but don't know what kind of impact it can have in different scenarios. For example, for the scenario 1, Is the profit 175 - 155 + 15 = 5 per option or something else? – wonderful world Dec 1 '19 at 4:01
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    Yes, scenario 1 would be a $5 gain but the calc would be 175 -155 - 15 (you reversed the sign) – Bob Baerker Dec 1 '19 at 4:14
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The day before expiration, the option will be trading for close to its intrinsic value (the in-the-money amount).

  • At $175 it will be $20
  • At $157 it will be $2 plus a modest amount of time premium
  • At $150 it will be worth zero

To determine option price on December 20th, you'll need a pricing formula. You have three choices:

  • Download the equations for Excel

  • Download software that does this

  • Use an online option calculator. Here are two:

Calculator1

Calculator1

The option's future price depends on the implied volatility at that time. Unless you have a strong belief of what that may be, use the current implied volatility.

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  • So, for my investment of $1515, in the first scenario, I will make a profit of $2000. I will make $200 in scenario 2. I will lose the investment of $1515 for the scenario 3. Is that correct? – wonderful world Dec 1 '19 at 4:22
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    At expiration: If the stock's price is less than the strike price, the call's value is zero. At expiration, if the stock price is greater than the strike price then intrinsic value is stock price minus the strike price. In both cases, subtract the cost of the call to determine P&L. – Bob Baerker Dec 1 '19 at 15:03

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