I'm seeking a generic formula for calculating the BreakEvenPoint (BEP) of 2+ CoveredCalls (CC). Of course a CoveredCall consists of a LongStock plus a ShortCall. Reading the BEP from the PnL chart is not satisfactory; rather a generic math formula is needed. For example for these 3 CoveredCalls: https://optioncreator.com/stzn4en Here the stock was bought at different prices ($15, $16, $17), but all the options were ShortSold when the stock was at $16. Just a demo. On the PnL chart the BEP of these 3 CCs is somewhere about 6.75 or so, but need the exact value using a formula. Anyone know a formula?
Btw, the BEP formula "B/E = initial underlying price – call premium received" at https://www.macroption.com/covered-call/#break-even-point for just 1 CoveredCall is definitely wrong if the buy price of the owned stock was different from the current stock price (as is the case in my example above). I guess similarily wrong even at many other such "options expert" sites...
Subtraction? So what? Can you write at least a full sentence so that everybody will understands what you really mean?
Total stock cost minus total premium sold divided by number of shares. Example: Bought at 15x100 , 16x100 , 17x100 Sold 1x1.3, 1x1.5, 1x1.8 1500+1600+1700 = 4800 1.3+1.5+1.8= 4.6 (460) 4800-460 = 4340 4340/300 = 14.47
Thx, looks logical, but unfortunately I was not able to verify/confirm it. Could you please tell also the other parameters like the strikes and DTEs you used.
Strikes & DTE make no difference if you're only looking at BE. Obviously the different strikes & DTE will move/decay at different rates but doesn't change BE. Your graphs will be different with different strikes & DTE.
Can you do your calc also by using the numbers in the initial posting? Because something does not fit when using your numbers --> watch the PnL chart and of course especially the BEP (non-existent ): https://optioncreator.com/stnn078
1500+1600+1700 = 4800 973+1295+788 = 3056 4800-3056 = 1744 1744/300 = 5.81 Definitely NOT. Add the premium to the strike. So the 12 sold for 9.73 and the 20 sold for 7.88 all when the stock was 16 ??? NO! Silly to sell the 4 strike on a 16 stock. That graph tool is messing you up. Keep it simple and do the math. Vol is lower but look at the Apr calls on F below with stock 11.4 Nothing like your graph tool.
5.81 is wrong. It has to be about 6.75, just watch the orange line crossing 0 at the y axis. The Premiums were calculated using the Black-Scholes calculator using S=16, DTE=90, IV=300. It does not make any sense to come up with a new set of such data as it does not add any new value or insight to the problem. And: you better should use such a table that also includes the IVs.