 # Break-even Prices?

I have some silly questions

1, What is the breakeven price of a call option?

2, What is the breakeven price of a naked call?

3, What’s the breakeven price of a covered call? (No Formula, Please)

First two are the same. There is no concept of breaking even there. For a call writer - you provide someone else the underlying when they exercise the option. So you gained the premium and gave up the underlying at whatever price you got for it at the time of exercising the option…

For a covered call - the price paid for the Underlying less the premium received. Here breakeven is possible - since you paid for the Stock and received the Premium So you receive the Spot price at the end. If that spot price is not greater than the original amount paid for the stock lesspremium received - you lost out.

if I understand the question correctly ( question is clear enough , but it is me who is in a fog ), the breakeven price for 1 and 2 is = ( strike + option premium ) ( assuming other costs and premium zero .because above that price the option is in the money , below that it is out…

For a covered call , breakeven would be initial cost of the asset - call option premium ( i assume the strike is written at the initial value of the asset)

first of all when there are two parties to the transaction as in a NAKED CALL - why would there be a breakeven?

Short (Writer) gets the premium. Long gets the asset if they decide to exercise. Otherwise they lose the premium paid. If the short has to give up the asset - he gives up the asset. He can have no breakeven.

I think (1) and (2) are the same thing - The call option is a NAKED CALL only.

Buyer of the call breaks even when the security price is strike + premium, and writer of the call breaks even when the security is strike + premium. Any price higher is a win for the buyer, and any price lower is a win for the writer. The buyer and writer have identical but opposite payoffs, so their breakeven point is the same.

Thank you all.

V5, P402, EXAMPLE 1.D