Purchase Option Valuation Calculator

Purchase options have real value. This calculator quantifies.

Strike price

Expected value at exercise

Exercise probability %

Years to exercise

Option value

$1,275,000

Intrinsic value

$1,800,000

Time value

$750,000

How the math works

Intrinsic = expected value − strike. Time value ~ 3% × strike × years. Option value = (intrinsic + time) × exercise probability.

On $5M strike, $6.8M expected, 50% exercise prob over 5 years: $1.8M intrinsic + $750k time = $2.55M × 50% = $1.28M option value. That's real landlord give-up. Most institutional landlords refuse buy options absent major deal concessions.

How to Use

Enter strike price (option exercise price).
Enter expected property value at exercise.
Enter exercise probability %.
Enter years to exercise.
Read option value.

Frequently Asked Questions

Strike price structures?

Fixed price (e.g., $5M). Formula price (multiple of NOI, e.g., 8× NOI). Market appraisal. CPI-indexed. Pre-negotiated step schedule. Each structure transfers different risk/reward between tenant and landlord.

Why landlord grants?

Deal concession to attract strong tenant. Risk transfer (fixed price locks in landlord's realization). Long-term hold intent by tenant. Some landlords dislike options — reduce liquidity. Institutional: often refuse. Family offices: more flexible.

Valuation?

Black-Scholes on property value with strike. Intrinsic value (max(0, market − strike)). Time value (volatility × years). Large portfolios value options at ~5-15% of property value for moderate ITM options with 5+ year tail. OTM options worth much less.