# Option Strategy Question (Schweser)

I’m a bit confused on the breakeven price for a covered call strategy and profit from a protective put? Question #205 (P. 216 Practice Exam Volume #2) Given Stock Price: (\$25.96 Today) (\$27.13 @ Expiration) (Call Premiums) Strike ((Put Premiums)) (\$4.20) \$22.50 ((\$0.25)) (\$2.00) \$25.00 ((\$0.65)) (\$0.65) \$27.50 ((\$2.00)) Calculate the breakeven stock price on a \$22.50 covered call strategy and profit from a protective put using a strike price of \$25? Given answer: \$21.76 breakeven for the call, \$0.52 for the put.

This question seems extremly difficult, I mean you write a covered call hoping that you position doesn’t get called in but it will according to these prices!

Ahh never mind I think I got it. You are long at \$25.96 Sell \$22.50 Call So you are called out right away 25.96-22.50= Down \$3.46 but you get the \$4.20 premium (\$0.74) So breakeven would be 22.50-.74 = \$21.76

ahhh makes sense now, nice catch on that one

what about the put? ive been working on that and can’t find a way to make the #s work

For the put… Long at \$25.96 Ending Price: \$27.13 Profit = \$1.17 Cost of Put = \$0.65 Profit after cost of put = \$1.17-.65= \$0.52 Kind of a tricky question when you are on question #205/240.

I keeping forgetting about the other side to it, valuing it as a simple call or put thanks for that blue!

getterdone Wrote: ------------------------------------------------------- > I keeping forgetting about the other side to it, > valuing it as a simple call or put thanks for that > blue! good one, I suck at option strategies.