US Options Profit & P&L Visualizer

How US Option Contracts Work

Options are powerful financial derivatives that give you the right, but not the obligation, to buy (Call) or sell (Put) an underlying stock at a specific price (Strike Price) before a certain date (Expiration).

1. The "100 Share" Rule

In the US market, one standard option contract controls 100 shares of the underlying stock. If an option premium is quoted at $2.50, the actual cost to buy the contract is $250 ($2.50 x 100 shares).

2. Contract Fees & Commissions

While many brokers have moved to $0 commissions for stocks, many still charge a fee for options. Full-service brokers like Schwab, E*Trade, and TD Ameritrade typically charge $0.65 per contract. Discount brokers like Robinhood and WeBull often offer $0 option trades.

3. Intrinsic vs. Extrinsic Value

The value of an option is split into two parts:

• Intrinsic Value: The amount the option is "in the money" (e.g., if you have a $150 Call and the stock is at $155, the intrinsic value is $5).
• Extrinsic (Time) Value: The remaining value of the premium, which decays as the expiration date approaches (Theta decay).