Options Profit and Loss (P&L)

How is open Profit/Loss (P/L) calculated?

Open P/L, also known as unrealized P/L, estimates the value gained or lost on your option position since it was opened. This calculation uses the option's mid-price, which is the average between the bid and ask prices.

Example:

You purchased 1 XYZ 25 APR 2025 $45 Call at $5.00.

Current quote: Bid $4.95 / Ask $5.15 (Midpoint: $5.05)

Your current Open P&L would be +$0.05, based on the midpoint pricing. Typically, securities are sold at the bid price and bought at the ask price. Your order’s limit price will default based on this convention—selling orders default to the bid, and buying orders to the ask. Always double-check your limit price before placing the order to ensure it aligns with your intended execution.

Note, the P/L calculation is an estimate provided solely for informational purposes and it does not represent your actual account profit and loss. Note that the last price and market value for options in your positions is also based upon the mid-point price. You are not guaranteed to receive the execution price or the profit/loss that you see displayed in your Open P/L. Actual market conditions vary, and your position may close at a different gain or loss than the one displayed. Generally, orders will execute at the bid or ask price but in some instances may execute closer to the mid-price. In a fast-moving or less liquid market, orders are less likely to be filled near the mid-price.

How do I calculate my cost basis if I was assigned or exercised?

When exercising or being assigned on options, the cost basis per share is calculated differently depending on whether it's a call or put option:

Exercising a Call Option

• Cost Basis = Strike Price + Option Premium + Fees

Assigned on a Call Option (Written Call)

• Cost Basis = Strike Price + Option Premium - Fees

Exercising a Put Option

• Cost Basis = Strike Price - Option Premium - Fees

Assigned on a Put Option (Written Put)

• Cost Basis = Strike Price - Option Premium + Fees

These calculations help determine the final per-share price paid or received, factoring in the strike price, option premium, and any trading fees.

Option trading entails significant risk and is not appropriate for all investors. Option investors can rapidly lose the entire value of their investment in a short period of time and incur permanent loss by expiration date. You need to complete an options trading application and get approval on eligible accounts. Please read the Characteristics and Risks of Standardized Options and Option Spread Risk Disclosure before trading options.