i What this calculator does
An option's payoff diagram is the whole trade on one page: where it breaks even, how much it can lose, how much it can make and over what price range. This calculator draws it for seven common structures, from a plain long call to a straddle, from the spot price, strikes and premiums you enter, and reports the break-even prices, the maximum profit and the maximum loss in money terms for your contract size.
It covers the payoff at expiry only, which is the part of options that is pure arithmetic. Time value, implied volatility and what the position is worth before expiry are a different subject, introduced in the options trading article. South African traders meet options on the JSE derivatives market and as structures inside some broker products.
This calculator is for educational purposes only. Results are estimates and may vary depending on market conditions, spreads, commissions, platform settings, and exchange rates. It should not be considered financial advice.
The seven structures
A long call pays when the share rises above the strike by more than the premium; a long put pays when it falls below. A covered call combines shares you own with a call you sell: the premium is income, the upside above the strike is given away. A cash-secured put sells a put against cash set aside to buy the shares: the premium is income, the downside below the strike is yours. A bull call spread buys one call and sells a higher one, capping both the cost and the gain. A protective put is insurance on shares you own. A straddle buys a call and a put at the same strike and pays only if the share moves a long way in either direction.
Reading the diagram
The bars show profit or loss for the whole position at each expiry price across a range of 60% to 140% of today's price. Where the bars cross zero is break-even; a strategy with two break-evens, like a straddle, needs the share outside both. The maximum loss for the long structures is the premium paid, which is also the most common outcome; for the sold structures it is the share going to zero, which the table shows as the floor. Nothing here changes with time or volatility, because at expiry an option is worth exactly its intrinsic value and nothing else.
What this leaves out
Everything that happens before expiry. An option's price today includes time value that decays, and a change in implied volatility can move the position sharply with the share unchanged. Early assignment on American-style options, dividends, margin on sold options and the brokerage on each leg are also outside the model. For South African traders the practical routes are the JSE's listed derivatives, where contract sizes and expiries are standardised, and CFD or structured products from brokers, where the option is embedded; both are introduced in the options article and the broader derivatives comparison.
Spotted an outdated figure? If a rate, limit or formula in this calculator no longer matches its source, email us the page and the source. A material correction is dated on the Updates Log.
Frequently asked questions
Why does the calculator only show the payoff at expiry?
Because that is the only part of an option that is fixed arithmetic. Before expiry the price depends on time left and implied volatility, which need a pricing model and change every minute. The expiry payoff is the skeleton every option trade is built on.
What does "per share" premium mean?
Option prices are quoted per underlying share, and a standard contract covers 100 shares, so a premium of 5 costs 500 per contract. Enter the quoted premium and set the contract size your market uses; JSE single-stock options often cover 100 shares, index options differ.
Is the maximum loss on a cash-secured put really the share going to zero?
Yes, less the premium received. It is the same risk as owning the shares from the strike price down, which is why the strategy is only sensible on a share you would be happy to own at that price.
Why is the covered call capped?
Because you have sold the right to buy your shares at the strike. Above it, every rand of share price gain is paid away to the call buyer; the premium is your compensation for giving up that upside.
Can South Africans trade options?
Yes. The JSE lists options on single shares, indices and currencies through its derivatives market, accessible via a stockbroker with a derivatives account, and some CFD brokers offer option-like products. Availability and contract specifications differ, so check the broker.
Why does my straddle need such a large move?
Because you pay two premiums. The share must move further than the combined premium in one direction before expiry. Straddles are a bet on volatility, and they lose if the share stays quiet, which it does most of the time.
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