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T1m3Wizard t1_ixs8ylg wrote

Why does it have to drop so much to break even? Shouldn't you be in profit the moment it hits 403 and below?

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drewski2305 t1_ixtnuja wrote

because he paid for the puts. $403 put is profitable if SPY drops below that strike, but if pay $1.75 per contract upfront, you have to recoup that loss as well. $403 - $1.75 = $401.25 cost basis, so to breakeven, it must be at or below that price.Say you bought a cheap put for 1 cent contract, but it isn't gonna be at the $403 strike, it would probably be like $350. It is way cheaper cost because it has such a low chance of the stock dropping below the strike

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ChapterJolly8220 t1_ixt8lht wrote

Breakeven price has nothing to do with profit.

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drewski2305 t1_ixtnx0e wrote

it absolutely does. he needs SPY to drop below his breakeven for the trade to be profitable

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ChapterJolly8220 t1_ixtpiwt wrote

I’m sorry what? He’s only down 8% on this trade. It’s only coincidence that his break even is so close. It’s all about what premium you bought it at and the Greeks

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drewski2305 t1_ixtpzov wrote

his breakeven price is not static. it will not change. that is the price he needs it to be at, or below, to make any money on this trade at expiration. monday morning, if spy dips down, he could sell for a profit as there is still some theta value. at expiration, if spy is over his breakeven price, he will lose money. Strike price - premium paid = breakeven price

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ChapterJolly8220 t1_ixtrc97 wrote

Breakeven is does mean the profit price. My Breakeven on my current trade is 413 (strike 407) but I’m up 5%. It’s all about what the price is AT expiration and if you’re trading options until expiration - you’re doing it wrong

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