Shay, I updated my wording in my previous posting: the stated commission of $1 is for the 100 shares of the stock belonging to the 1 option contract.
Firstly, how certain are you about your $4.60 calculation? With S=100, K=100, T = 21 days, vol of 40%, I don't get 4.6. Secondly, let me rephrase. You specifically mention that you will be using some bands around the strike, in order to avoid trading too frequently. Assume your hedge needs to be taken off and reinstated at strike +/- 10 cents, you will be selling at 99.90 - bid/offer and buying at 100.10 + bid/offer. Including commissions that you have calculated above, how many such round-trip iterations until you break even?
Hmm. what does your calculator give instead? Sorry, but a funny question I must say because I'm not interested in break-even , but in taking nearly all of the credit. Ok, if it makes sense, I'll shortly post the number of the break-even trades under the above constraints too... Update: The following formula should give the answer: BreakEvenTrades = $460 / ($1 + $0.10) = 418 ie. one can take the previously said 400.
I get 3.82 and change... You should be VERY interested in the breakeven as well as all such questions. I am sure you can figure out why.
What do you mean by "and change"? Maybe you have not set EarningsYield = 0 and DividiendYield = 0 ? And t has to be 21/252 = 0.0833333333 <updated>