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SIE: Options
SIE practice questionmediumBreakeven points

For a put spread, how is the breakeven calculated?

  1. AHigher strike plus net premium paid
  2. BLower strike plus net premium paid
  3. CHigher strike minus net premium paid✓ Correct answer
  4. DLower strike minus net premium paid
Explanation

Why CHigher strike minus net premium paid

The breakeven for a put spread is found by subtracting net premium from higher strike. The other options confuse the direction of the formula.

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