What is the Options PnL Calculator on Binance?*
The Options PnL Calculator Feature on Binance allows you to visualize your potential profit and maximum losses at the Options Expiry date, according to parameters such as your price predictions scenario, the underlying asset’s spot index price, and the Option’s premium. This feature applies to European Options listed on Binance and may be a helpful tool for those new to Options trading.
*Please note that this functionality is only available to a restricted number of Binance users at this stage. For more information, please contact customer support.
How to use the Options PnL Calculator on Binance?
1. Log in to your Binance App and make sure that you are using the Pro version. Tap [Futures] at the bottom of your screen.
2. You will be redirected to the Futures USDⓈ-M trading interface. Tap the [Options] tab next to the [COIN-M] tab.
3. Choose the Options Symbol for which you would like to simulate a trade (e.g., BTC Options), then tap the Options PnL Calculator icon at the top right of the trading interface.
4. The Options PnL Calculator box will pop up, allowing you to input your forecasted price direction for the Option underlying symbol (up or down), and your predicted price in USDT.
5. The trading interface will then display the potential profit and the maximum potential loss from the purchase of the Option selected. Please note that the Options PnL Calculator will display this profit and loss simulation for both Call and Put Options.
The calculation of Maximum Profit and Maximum Losses are based on the following formulas:
Possible Profit*:
Possible Profit (Call) = Predicted Price - Strike - Ask
Possible Profit (Put) = Strike - Predicted Price - Ask
Maximum Losses*:
Maximum Losses (Call) = 0 - Ask
Maximum Losses (Put) = 0 - Ask
In which:
- Strike = Strike Price (also called exercise price)
- Ask = Ask Price = Option Price (Premium) at T0 = market price of the option contract at the time of purchase
*for simplicity, fees are not accounted for in the calculation
6. You can drag the Options PnL Calculator anywhere in the trading interface by clicking on the “=” icon on the top left of the box.
Examples of Options Potential Profit and Maximum Loss Calculation using the Options PnL Calculator
Example 1: PnL calculation for Call Options
Let’s assume that you forecast an increase in BTC price and want to purchase a BTC/USDT Call Option, with a current spot index price of 40,000.96 USDT.
Before placing your buy order, you want to estimate the potential profit and losses arising from the purchase of that Option. In order to do so, select the BTC Options at the top left corner (1), and tap on the Options PnL Calculator icon (2). The Options PnL Calculator box will pop up.
Before placing your buy order, you want to estimate the potential profit and losses arising from the purchase of that Option. In order to do so, select the BTC Options at the top left corner (1), and tap on the Options PnL Calculator icon (2). The Options PnL Calculator box will pop up.
You expect the BTC price to increase and reach 41,500 USDT at the Option expiry date (05/20/2022).
Upon inputting 41,500 USDT as the predicted price on the Options PnL Calculator, the Options List will update the [Possible Profit] and [Max Loss] columns for each Options listed.
Let’s look at the BTC/USDT Call Option with a strike price of 37,000 USDT and an Ask Price of 3,000 USDT, representing the Option Premium.
The Options PnL Calculator will display the following Possible Profit* and Max Loss:
Possible Profit**= Predicted Price - Strike - Ask = 41,500 USDT - 37,000 USDT - 3,000 USDT = 1,500 USDT
Maximum Loss** = 0 - Ask = -3,000 USDT (premium price)
*Make sure not to mistake the Possible Profit (the profit you will make if the Option’s underlying asset reaches your forecasted price at expiry) and the Potential profit (illimited when you purchase a Call Option).
**For simplicity, fees are not accounted for in the calculation
The calculation assumes that the user places a BBO order, matching it with the 1st Ask Price (lowest sell-side price on the order book) for buy order.
The calculation assumes that the user places a BBO order, matching it with the 1st Ask Price (lowest sell-side price on the order book) for buy order.
Example 2: PnL calculation for Put Options
Let’s now assume that you forecast a sharp decrease in BTC price, from 40,000.96 USDT USDT to 35,500 USDT at the Option expiry date (05/20/2022)
You, therefore, decide to take advantage of that potential price drop by buying a Put Option, giving you the right (but not the obligation) to sell the underlying asset at Option expiry.
Before doing so, you first want to estimate the potential profit and losses arising from the purchase of that Option Put.
You open the Options PnL Calculator and input the forecasted price of 35,500 USDT:
Upon inputting 35,500 USDT as the predicted price on the Options PnL Calculator, the Options List will update the [Possible Profit] and [Max Loss] columns for each Options listed.
Let’s now look at the BTC/USDT Put Option with a strike price of 38,000 USDT and an Ask Price of 200 USDT, representing the Option Premium.
The Options PnL Calculator will display the following Possible Profit* and Max Loss:
Possible Profit**:
Possible Profit**:
Possible Profit (Put) = Strike - Predicted Price - Ask = 38,000 USDT - 35,500 USDT - 200 USDT = 2,300 USDT
Maximum Loss**:
Maximum Loss (Put) = 0 - Ask = -200 USDT (premium price)
*Make sure not to mistake the Possible Profit (the profit you will make if the Option’s underlying asset reaches your forecasted price at expiry) and the Potential profit (equal to the strike price of the put minus the price of the put).
**For simplicity, fees are not accounted for in the calculation
The calculation assumes that the user places a BBO order, matching it with the 1st Ask Price (lowest sell-side price on the order book) for buy order.
The calculation assumes that the user places a BBO order, matching it with the 1st Ask Price (lowest sell-side price on the order book) for buy order.