Breakevens for call/put

CFA Level I Derivatives
#1

Hello

I saw this in another thread but it was not answered. The breakeven for:

call = (strike + premium)

protective put =( stock price + premium).

put = (strike-premium)

covered call = (stock price-premium).

It makes more sense for call and protective put. You pay premium, so premium is added back.

But it’s not so clear in the case of a put and covered call where premium is subtracted. Does anyone know?

#2

For a put you make money when the stock price decreases, so it has to decrease enough to cover the put premium.

For the covered call you received the premium, so the price has to decrease to wipe out the premium you received.

#3

Thanks for the explanation!

#4

You’re welcome.