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This is option spread trading calculator spreadsheet first part of the Option Payoff Excel Tutorial. In this part we will learn how to calculate single option call or put profit or loss for a given underlying price. This is the basic building block that will allow us to calculate profit or loss for positions composed of multiple optionsdraw payoff diagrams in Exceland calculate risk-reward ratios and break-even points. It is a function that calculates how much money we make or lose at a particular underlying price.

In the above example you can identify several inputs that our payoff formula will take — they are the numbers we already know:. In an Excel spreadsheet, we first need to set up three cells where we will enter option spread trading calculator spreadsheet inputs, and another cell which will show the output. I have decided to enter the strike, initial price and underlying price inputs in cells C4, C5, C6, respectively. The result will be shown in cell C8.

While option spread trading calculator spreadsheet necessary for a simple calculation like this one, it is a good option spread trading calculator spreadsheet to somehow graphically differentiate input and output cells, especially when you are building a more complex spreadsheet. It will make the sheet much easier to use and reduce the risk of you or someone else accidentally overwriting your formulas in the future. It is best to do this option spread trading calculator spreadsheet across all your spreadsheets.

Personally, I always make the background of input cells where user is expected to enter values yellow and the output cells which option spread trading calculator spreadsheet contain formulas and should not be overwritten green — just my habit, you can of course use different colors, fonts, borders, or other formatting. Now we have the cells ready and we can build the formula in cell C8, which will use the inputs in the other cells to calculate profit or loss.

In general, call option value not profit or loss at expiration at a given underlying price is equal to the greater of:. Now we need to implement this formula in Excel. It is very easy, because Excel has the MAX function, which takes a set of values separated with commas and returns the greatest option spread trading calculator spreadsheet them.

In our example, the formula in cell C8 will be:. With the inputs in our example 45 and 49cell C8 should now be showing 4. You can test different values for the underlying price input and see how the formula works. For any underlying price smaller than or equal to 45 it should return zero; for values greater than 45 it should return the difference between cells C6 and C4. This is again very simple to do — we will just subtract cell C5 from the result in cell C8.

The entire formula in C8 becomes:. Cell C8 should now be showing 1. You can again test different input values. For put options the logic and formula is almost the same, with just one little difference: The put option profit or loss formula in cell G8 is:.

Now we have created simple payoff calculators for call and put options. However, there are still some things we can improve or add to make our spreadsheet more useful.

Furthermore, our calculator only shows profit option spread trading calculator spreadsheet loss per share, while many people are actually more interested in total dollar profit or loss, especially when working with positions of multiple option contracts. Therefore, we should improve our calculations to also consider direction long or shortposition size number of contracts and contract size number of shares represented by one option contract.

We will merge our call and option spread trading calculator spreadsheet calculations in the next part of the tutorial. If you don't agree with any part of this Agreement, please leave the website now. All option spread trading calculator spreadsheet is for educational purposes only and may be inaccurate, incomplete, outdated or plain wrong.

Macroption is not liable for any damages resulting from using the content. No financial, investment or trading advice is given at any time. Home Calculators Tutorials About Contact. Tutorial 1 Tutorial 2 Tutorial 3 Tutorial 4.

For example, it answers the following question: Payoff Formula Inputs and Outputs In the above example you can identify several inputs that our payoff formula will take — they are the numbers we already know: Preparing the Cells In an Excel spreadsheet, we first need to set up three cells where we will enter the inputs, and another cell which will show the output.

Call Option Value Formula Now we have the cells ready and we can build the formula in cell C8, which will use the inputs in the other cells to calculate profit or loss. In general, call option value not profit or loss at expiration at a given underlying price is equal to the greater of: In our example, the formula in cell C8 will be: But we are not finished yet.

The entire formula in C8 becomes: Put Option Profit or Loss Formula For put options the logic and formula is almost the same, with just one little difference: The put option profit or loss formula in cell G8 is: The result with the inputs shown above 45, 2.

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Select option strategy in the dropdown box see list of all 54 strategies included:. If you are analysing a specific trade, you can enter strikes, position sizes and initial prices in the yellow cells.

You can also set a specific underlying price and see values and profit or loss for individual options and the entire position at that price:. In the top right corner you can see maximum profit , maximum loss and risk-reward ratio.

This is very useful for evaluating potential trades. You can also see break-even points and profit or loss at each strike:. By default the chart shows aggregate profit or loss for the entire position. You can also display individual legs:. Detailed instructions are available in the user guide in pdf , which you will also get. If you want another strategy included, please contact us. One-time payment, yours forever. Does it work in my version of Excel? The calculator works in all versions of Excel from Excel 97 to Excel It was developed in Excel and tested in other versions.

For older versions you may need to use a different version of the calculator, which is also included. Generally you need your software to support Excel formulas and macros.

How do I pay? All payments are processed by PayPal, which provides world-class security and buyer protection. Option Strategy Simulator — Simulates option strategies not only at expiration, but at any time, including intraday. Works with volatility, Greeks and more advanced option concepts.

If you don't agree with any part of this Agreement, please leave the website now. All information is for educational purposes only and may be inaccurate, incomplete, outdated or plain wrong. Macroption is not liable for any damages resulting from using the content. No financial, investment or trading advice is given at any time. Home Calculators Tutorials About Contact. Calculator 1 Calculator 2 Calculator 3 Calculator 4.

Option Strategy Payoff Calculator.