Crypto and derivatives · updated October 21, 2026
What is a call option and how do you calculate the profit
A call option gives you the right to buy an asset at a set price (the strike price), until the expiry date. You buy one when you think the price will go up. You profit if, at expiry, the price is above the strike plus the premium you paid.
Call option formula
- Strike price
- The price at which you have the right to buy.
- Premium
- What you paid for the option, per share.
- max(…, 0)
- If the price is below the strike, you do not use the right and the option is worth 0.
Worked example
You buy a call with a $100 strike and a $5 premium, for 100 shares. At expiry the stock is at $120.
You paid $500 and made $1,500, a +300% return. If the stock had stayed at $100 or below, you would have lost the whole $500. Your break-even is $105.
How to read call option
A call gives you exposure to a rise for a small amount, but you need the price to rise far enough and in time.
When call option can fool you
Right, but too late: if the stock rises after expiry, the option has still expired worthless. Pricey premiums before earnings: options get more expensive ahead of results, and after the announcement the premium drops sharply, even if the price rises a little.
Related terms
Learn it in the Academy
Questions about call option
When do I buy a call option?
When you think the price will rise a lot in a short time and you want to risk only a fixed amount, the premium.
Do I have to buy the shares at expiry?
Not necessarily. You can sell the option before it expires and pocket the difference. Most investors do exactly that.
These explanations are for information only. They are not a recommendation to buy or sell.
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