Breakeven Formula

Discussion in 'Options' started by shortie, Feb 22, 2009.

  1. I trade equities but want to play with options around this bottom. Sorry if this is a stupid question. if i want to buy 09 Mar SPY calls, how do i calculate the breakeven? is there a formula for this?

    I am looking at two strikes:
    09 Mar 78.00, current premium ~3.50
    09 Mar 77.00, current premium ~3.95

    current stock price 77.4.
  2. Most who ask this question mean: What is the break-even if I hold until the options expire. Holding that long is usually a big mistake.

    To calculate, add the premium to the strike. Thus:

    1) 78 + 3.50. B/E = 81.50

    2) 77 + 3.95. B/E = 80.95

    Stock price not relevant.

  3. rosy2


    strike + cost of option