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:
A traditional risk chart, showing the value of trades at expiration as a function of the underlying price.
An Outcome Probability Chart, showing the probability of various P/L outcomes from the option strategy.
For an intro to what the calculator can do:
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.
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
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.
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.
The calculator will run a simulation of many different possible
price paths and compute the resulting profit/loss.
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
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