In options trading, what is the breakeven point for puts (long or short)?

In options trading, the breakeven point for put options is determined by the strike price of the put option minus the premium paid for the option. When you purchase a put option, you have the right to sell the underlying asset at the strike price. For the trade to be profitable, the underlying asset must fall below the breakeven point.

To find this breakeven point, you start with the strike price, which is the price at which you can sell the asset. Since you paid a premium for that right, this cost must be recouped to avoid a loss. Thus, you deduct the premium from the strike price. If the market price of the underlying asset falls below this calculated breakeven point, you start realizing profits from exercising the option.

For example, if you bought a put option with a strike price of $50 and paid a premium of $5, your breakeven point would be $45 ($50 strike price - $5 premium). Below this price, the put option becomes beneficial, and you start to profit. This approach ensures that understanding how the breakeven point functions in relation to both the strike price and the premium is crucial for effective options trading.