Long Put Break-Even Price
Underlying price at expiration at which a long put breaks even: strike price minus premium paid.
When to use: Use to evaluate how far the underlying must drop for a long-put directional or hedge trade to recoup its premium. Below this number, intrinsic value exceeds premium paid; above it, the trade is a loss at expiration.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| BreakEven | Break-Even Price | Underlying price at which the position breaks even at expiration | $ |
| Strike | Strike Price | Exercise price of the option contract | $ |
| Premium | Premium per Share | Cash credit received per share for selling the option | $ |
Real-Life Examples
Example 1: $50 Strike Put at $1.10
You buy a $50-strike put for $1.10 of premium per share.
Given
Step-by-Step
The underlying must finish below $48.90 at expiration for the long put to be profitable — about 2.2% below strike.
Frequently Asked Questions
A long put profits as the underlying falls. The put has intrinsic value of max(0, Strike − Stock), so to recoup the premium paid the underlying must fall to at least Strike − Premium.
When pairing a put against existing long stock (a protective put). The break-even tells you the floor your hedge actually creates — Strike − Premium is the worst-case effective sale price on your shares.