Breakeven for Basic Strategies

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In options trading, the breakeven point (BEP) is the stock price at which your total profit/loss is $0 at expiration. It's where your gains equal your costs, and beyond it, you start making or losing money depending on your strategy.

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📈 Breakeven for Basic Strategies

✅ Call Option (Long Call)

You make money if the stock rises above this price:

$$\textbf{Breakeven} = \text{Strike Price} + \text{Premium Paid}$$

Example:

• Buy Call @ $50

• Pay $3 premium

• 🔹 Breakeven = $50 + $3 = $53

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✅ Put Option (Long Put)

You profit if the stock falls below this price:

$$\textbf{Breakeven} = \text{Strike Price} - \text{Premium Paid}$$

Example:

• Buy Put @ $40

• Pay $2 premium

• 🔹 Breakeven = $40 - $2 = $38

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🔀 Breakeven for Multi-Leg Strategies

Here it gets more complex—calculations vary by setup:

Strategy	Breakeven Formula
Covered Call	Strike Price + Premium Received - Cost Basis
Cash-Secured Put	Strike Price - Premium Received
Vertical Call Spread	Lower Strike + Net Debit Paid
Iron Condor	Two BEPs: Lower Put Strike + Net Credit, Upper Call Strike - Net Credit
Straddle	Strike Price ± Total Premium Paid

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🧠 Why Breakeven Matters

• Helps you assess probability of profit

• Determines risk/reward boundaries

• Crucial for strategy planning and exit timing