Option Payoff at Expiration: Profit and Loss, Drawn Out

Fifty plus two is fifty-two. That sum is the breakeven on a 50 call bought for $2.00, and it answers the first question anyone should ask before buying one: how far does the stock have to go before the trade stops losing money?

Every figure below is an expiration value. On the last day the price collapses to intrinsic value alone, while before then its price also carries time value, which is why these sums describe the final close exactly and every earlier day only loosely.

The bought call

You pay $2.00 a share for the right to buy at $50. The contract costs $200. At expiration there are two outcomes.

At or below $50, the call is worthless. You lose the $200 you paid, and that’s the most a bought call can lose, whether the stock finishes at $49, at $20 or anywhere in between.

Above $50, the call is worth the stock price minus the strike. Subtract the $2 premium and multiply by 100.

The payoff table

Run the same sum across a range of prices and a shape appears.

Stock at expiration	Call value	Profit or loss per contract
$46	$0	-$200
$49	$0	-$200
$50	$0	-$200
$52	$2	$0
$54	$4	+$200
$58	$8	+$600

Below the strike the line is flat at minus $200. Above it, the line climbs $100 for every $1 the stock rises. It crosses zero at $52. Drawn on a chart, it’s a hockey stick.

The options profit calculator draws the same line. Enter the 50 strike, the $2.00 premium and one contract, then check that its line crosses zero at $52 and reads plus $600 at $58; if your table and the calculator disagree, one of them has the wrong premium or the wrong number of contracts, and it’s worth finding out which before you trust either.

The bought put

A put pays when the stock falls. Its breakeven sits below the strike, at the strike minus the premium.

The loss is capped at the premium, just as with the call. The gain is bounded too. A stock can’t fall below zero.

The short side mirrors the long

Whoever sold you the 50 call collected your $200. Every dollar you make, they lose, and every dollar you lose, they keep. Flip the table’s last column and you have the seller’s payoff: plus $200 at any price up to $50, zero at $52, minus $600 at $58.

Keep going up. At $70, the seller is down (70 - 50 - 2) x 100, which is $1,800. At $90 it’s $3,800. Nothing stops the line, because a stock has no ceiling, and that is why a call sold without owning the shares is the position brokers restrict most tightly, and why the loss on a short call has no cap however carefully it’s sized.

A put seller’s risk is different in size. The worst case is the stock going to zero. On a 50 put sold for $2.00 that costs (50 - 2) x 100, or $4,800, a large number with a floor under it, and how much you can lose selling a put works through the cases in between.

What happens on the last day

An option left open into the final close gets settled one way or another. Out of the money, it simply expires. In the money, it usually turns into shares bought or sold at the strike.

For a bought 50 call, that means 100 shares and a $5,000 bill. Closing an option or letting it expire weighs the two choices. On a first trade, closing before the last hour is usually simpler.

Options can lose value quickly. The table shows only the final day, and before expiration the price also depends on the time left and on implied volatility, so a bought call can lose money for weeks even while the stock inches toward the strike. With the arithmetic done, the last lesson turns to the paperwork: getting your account approved and planning a first trade.