Chapter 06 · Section 6.1

Breakeven Point

Market Outlook   :  VOLATILE
Profit Potential :  practically 
                    unlimited
Loss Potential   :  limited to 
                    the sum of 
                    the premiums
Breakeven Point  :
The breakeven points occur when market price at expiration equals...
The trader is long both a call and a put. Therefore, he may have two breakeven points. The strangle strategy is very similar to the straddle. The breakeven point for the call is the HIGH exercise price PLUS the premiums paid, the breakeven point for the put is the LOW exercise price MINUS the premiums paid. The breakeven point for the call is the HIGH exercise price PLUS the premiums paid.