The basic of any call or put buying strategy comes down to several unique, yet consistently obvious economic issues. How much you are investing or risking, how much you stand to profit or gain and probably the most important factor to be cognitive of is calculating your breakeven point or points in any transaction.
Calculating The Long Call breakeven price
The calculation of the breakeven for a long call purchase is relatively easy. The formula is as follows:
FIGURE 1-1: EXAMPLES OF LONG CALL BREAKEVEN PRICES
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Calculating The Long Put breakeven price
The calculation of the breakeven for a long put purchase is the opposite. The formula is as follows:
FIGURE 2-2: EXAMPLES OF LONG PUT BREAKEVEN PRICES