This application allows you to evaluate the risk associated with trades of standardized stock options. It provides two views of a trade to help evaluate risks and potential outcomes:

Quick-Start Guide

For an intro to what the calculator can do:

  1. Click the Example Trades menu and select one of the choices - for example, Covered Call. This will populate the input fields with example values illustrating the type of trade you selected.
  2. Click the Generate Risk Chart button at the bottom. This will open a new window containing a risk chart for the option trade, showing the expected range of stock prices at the first expiry, their probabilities, and their corresponding profit/loss amounts. Interactive features include:
    • As you move the mouse over the red plot, it will show you the value of the trade at that price, and the probability of closing at or above the price.
    • A slider at the bottom of the window allows you to view the value of the trade before the expiry - by moving it back and forth, you can examine the risk chart for any date between tomorrow and the first expiry.
  3. In the risk chart, click the Simulation menu and select the first menu item. This will bring up another window for running a trade simulation. Click OK.
  4. The calculator will run a simulation of many different possible price paths and compute the resulting profit/loss.
  5. When the simulation completes, the chart will display the profit/loss outcomes of the simulation, from the worst loss (lower left) to the best gain (upper right). The bottom axis identifies the percentiles of the various outcomes, and moving the cursor over the plot allows you to see the probability of reaching or exceeding the corresponding P/L. For more information on how to read this chart, see the Outcome Probability Chart documentation

That's the quick introduction. For more detailed documentation, start on the Describing the Trade page.

For contact information, or to join the Option Risk Calculator announcements list, see the Contact Information page.

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DISCLAIMER: This risk calculator is for educational purposes only, and is not intended as a basis for trading decisions. Use at your own risk.