how to calculate call option payoffs
call option payoff refers to the profit or loss an option buyer or seller makes from a trade remember that there are three key variables to consider when evaluating call options strike price expiration date and premium these variables calculate payoffs generated from call options there are two cases of call option payoffs suppose you purchase a call option for company abc for a premium of 2 the option s strike price is 50 with an expiration date of nov 30 you will break even on your investment if abc s stock price reaches 52 meaning the sum of the premium paid plus the stock s purchase price any increase above that amount is considered a profit thus the payoff when abc s share price increases in value is unlimited 