About this calculator
This calculator focuses on the practical question for option buyers and sellers: "is this option fairly priced, and where do I break even?" It uses the Black-Scholes model under the hood but presents results around theoretical fair value vs premium paid, intrinsic/extrinsic split, and breakeven at expiration — what actually matters at the trade-decision moment.
Edge: theoretical minus paid
If the calculated fair value is above what you paid, you have positive theoretical edge — assuming your IV input is realistic. If you paid above theoretical value, you're paying excess premium and the trade requires the underlying to move more than the model expects. Edge is highly sensitive to the IV input; small IV changes flip the sign easily.
Intrinsic vs extrinsic value
Intrinsic = the in-the-money portion (call: max(0, spot − strike); put: max(0, strike − spot)). Extrinsic (time value) = everything else. A deep ITM call near expiration is nearly all intrinsic — you're effectively long stock with a strike price floor. A far OTM option is 100% extrinsic — a pure bet on movement.
Breakeven at expiration
For a call: strike + premium. For a put: strike − premium. This is the spot price you need at expiration to recover the premium paid. It doesn't account for time value before expiration — you can profit before then if the underlying moves favorably, even if you never reach breakeven.