Options Premium Calculator

Option premium = Intrinsic Value + Time Value. Intrinsic value is how much the option is in-the-money. Time value decreases as expiry approaches (theta decay) and increases with implied volatility. The six inputs to Black-Scholes pricing are: spot price, strike price, time to expiry, implied volatility, risk-free rate, and dividends.

Maximum loss when buying any option = premium paid. This is the defined, limited risk of being an option buyer. You cannot lose more than what you paid. Maximum profit for call buyers is theoretically unlimited as the stock price can rise indefinitely. For put buyers, maximum profit is strike price minus premium when the stock goes to zero.

Theta measures daily value erosion due to time passing. Options lose value acceleratingly as expiry approaches — ATM options lose approximately 10–15% of remaining value in the last week before expiry. Buyers are hurt by theta; sellers benefit from it. This is why buying weekly options close to expiry is statistically disadvantageous.

Implied volatility (IV) represents the market's expectation of future price movement. High IV = expensive options (good time to sell, risky to buy). Low IV = cheap options (better time to buy). India VIX tracks market-wide implied volatility. Buying options before results/events when IV is high often results in loss even if the prediction is correct.

In the Money (ITM): strike price below spot for calls (or above for puts) — has intrinsic value. At the Money (ATM): strike price equals or closest to spot price — highest time value, most liquid. Out of the Money (OTM): no intrinsic value, all time value. OTM options are cheaper but expire worthless most frequently.