How do I Calculate the Value of Stock Options?
Determining the value of stock options involves identifying the amount of options contracts owned and referencing the current value for those options. Options are contracts for 100 shares of stock, which expire on the third Friday of every month. By determining the value of the options, it is possible to identify if you have unrealized gains or losses on the options positions. Gains and losses are unrealized if you have not closed out the position yet. When the position is closed, the gains or losses will then be considered "realized."
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Instructions
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1
Find the strike price for the option. The strike price is the price the underlying stock must breach in order for the option contract to appreciate in value. The strike price is always identified at the end of the option title for calls and puts. Calls are options which appreciate when the stock appreciates. Puts appreciate when the stock depreciates. For example, if you owned 10 calls that expired in January with a strike price of $35, it would be identified as follows:
10 January $35 Calls
The "10" identifies the number of contracts owned. January identifies the month of expiration. The "$35" identifies the strike price, followed by the type of option. In this case, the type of option is a call.
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2
Find the month the option expires. Options are typically available for every month of the year. Using the same example from Step 1, if the position is listed as "10 January $35 calls," these options would expire on the third Friday of January.
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3
View the option chain. Entering the ticker symbol for the stock in your broker's search function will yield an option to "View Option Chain." The ticker symbol is used by your broker to identify specific stocks.The option chain is a table which will list all the available contracts for that stock.
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Find the month and strike price for your position to view the current price. The option chain for your month and expiration will have a column labeled "Bid." The bid is the price you would receive per contract if you were to sell the position. This can be used to value the options by multiplying it by the number of contracts you own. Using the same example, if the 10 January $35 calls were trading at $4 each, the calculation for the value of these options would be as follows:
10 x 100 x $4 = $4,000
Because each contract is worth 100 shares, we multiply the number of contracts by 100 shares and then multiply by the current price for the contract. This position is valued at $4,000.
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