Series 7 options cheat sheet: breakeven, max gain, max loss
Every options position the Series 7 asks about, with the formula and a worked example. Per-share figures; multiply by 100 for one contract.
Single options
Calls up, puts down: add the premium to a call's strike, subtract it from a put's strike.
| Position | Breakeven | Max gain | Max loss | Example: 50 strike, premium 3 |
|---|---|---|---|---|
| Long call | Strike + premium | Unlimited | Premium | BE 53 · loss $300 · gain unlimited |
| Short (uncovered) call | Strike + premium | Premium | Unlimited | BE 53 · gain $300 · loss unlimited |
| Long put | Strike − premium | Breakeven × 100 | Premium | BE 47 · gain $4,700 · loss $300 |
| Short put | Strike − premium | Premium | Breakeven × 100 | BE 47 · gain $300 · loss $4,700 |
Stock plus an option
Start from the stock price, then move by the premium: paying a premium moves the breakeven against you, receiving one moves it in your favor.
| Position | Breakeven | Max gain | Max loss | Worked example |
|---|---|---|---|---|
| Covered call (long stock + short call) | Stock cost − premium | Call strike − cost + premium | Breakeven × 100 | Buy at 52, write 55 call at 2: BE 50 · gain $500 · loss $5,000 |
| Protective put (long stock + long put) | Stock cost + premium | Unlimited | Cost − put strike + premium | Buy at 52, buy 50 put at 1.50: BE 53.50 · loss $350 |
| Short stock + long call | Short price − premium | Breakeven × 100 | Call strike − short price + premium | Short at 40, buy 42 call at 1: BE 39 · gain $3,900 · loss $300 |
| Short stock + short put | Short price + premium | Short price − put strike + premium | Unlimited | Short at 40, write 38 put at 1: BE 41 · gain $300 |
Spreads
Net the two premiums first. If you paid more than you received it is a debit spread; if you received more it is a credit spread.
| Spread | Breakeven | Max gain | Max loss | Worked example |
|---|---|---|---|---|
| Bull call (debit) | Lower strike + net debit | Strike gap − debit | Net debit | Buy 40 call at 4, sell 45 call at 1.50: debit 2.50 · BE 42.50 · gain $250 · loss $250 |
| Bear call (credit) | Lower strike + net credit | Net credit | Strike gap − credit | Sell 40 call at 5, buy 45 call at 2: credit 3 · BE 43 · gain $300 · loss $200 |
| Bear put (debit) | Higher strike − net debit | Strike gap − debit | Net debit | Buy 50 put at 4, sell 45 put at 1: debit 3 · BE 47 · gain $200 · loss $300 |
| Bull put (credit) | Higher strike − net credit | Net credit | Strike gap − credit | Sell 50 put at 4.50, buy 45 put at 1.50: credit 3 · BE 47 · gain $300 · loss $200 |
Straddles and combinations
| Position | Breakevens | Max gain | Max loss | Worked example |
|---|---|---|---|---|
| Long straddle (buy call + put, same strike) | Strike ± total premium | Unlimited | Total premium | Buy 50 call at 3 and 50 put at 2: BE 45 and 55 · loss $500 |
| Short straddle (sell call + put, same strike) | Strike ± total premium | Total premium | Unlimited | Write 50 call at 3 and 50 put at 2: BE 45 and 55 · gain $500 |
| Long combination (different strikes) | Call strike + total premium; put strike − total premium | Unlimited | Total premium | Buy 55 call at 1.50 and 45 put at 1: BE 57.50 and 42.50 · loss $250 |
Four rules to check every answer
6 options math practice questions
Taken from the Series 7 course. Click an option; every option is explained, with the math.
A customer buys 1 TUV Feb 60 put at 4. What are the customer's breakeven point and maximum potential gain?
- Adding the premium gives a call's breakeven; a put breakeven is strike minus premium.
- The stock cannot fall below zero, so a long put's gain is limited to breakeven x 100.
- Both figures ignore that the premium reduces the gain and lowers the breakeven.
- Correct. Breakeven = 60 - 4 = 56. Maximum gain occurs if TUV falls to zero: (60 - 4) x 100 = $5,600.
A customer buys 100 shares of KLM at $42 and writes 1 KLM Sep 45 call at 2. What is the customer's breakeven point?
- This adds the premium to the stock cost; the premium received lowers the cost basis.
- This is the call strike plus the premium, the breakeven for the call buyer.
- Correct. Covered call breakeven = stock cost - premium = 42 - 2 = 40.
- This is the call strike minus the premium, which has no meaning here.
A customer buys 100 shares of CDF at $50, buys 1 CDF 45 put at 2, and writes 1 CDF 55 call at 2.50. What are the maximum gain and maximum loss?
- These ignore the 0.50 net credit from the options.
- This applies the net credit in the wrong direction on both sides.
- Correct. Net credit 0.50. Max gain = (55 - 50 + 0.50) x 100 = $550. Max loss = (50 - 45 - 0.50) x 100 = $450.
- The long 45 put limits the downside; the stock does not need to reach zero.
A customer buys 1 ABC Aug 50 call at 5 and sells 1 ABC Aug 55 call at 2. What is the breakeven point?
- This subtracts the debit from the higher strike, which is the method for a put spread.
- This adds the premium received to the higher strike.
- Correct. Net debit = 5 - 2 = 3. Debit call spread breakeven = lower strike + debit = 50 + 3 = 53.
- This adds the 3-point net debit to the higher strike (55 + 3); the debit is added to the lower strike.
A customer sells 1 JKL Sep 60 call at 5 and buys 1 JKL Sep 65 call at 2. What are the breakeven point and maximum loss?
- Correct. Net credit 3. Credit call spread breakeven = lower strike + credit = 63. Max loss = (5 - 3) x 100 = $200.
- Subtracting the credit from the lower strike is not correct for a call spread.
- $300 is the net credit, which is the maximum gain.
- The long 65 call caps the loss at the 5-point spread minus the credit.
A customer buys 1 PQR Oct 50 call at 3 and 1 PQR Oct 50 put at 2.50. What are the breakeven points?
- Correct. Total premium = 5.50. Breakevens = 50 - 5.50 = 44.50 and 50 + 5.50 = 55.50.
- These apply the call premium to the downside and the put premium to the upside; use the combined 5.50.
- These are each option's own breakeven (50 - 2.50 and 50 + 3); a straddle needs the combined 5.50.
- These use a 4.50 total premium; the correct total is 3 + 2.50 = 5.50.
Options math under exam time pressure
Four full-length Series 7 exams with every calculation worked out under the question.
FAQ
What is the fastest way to find an options breakeven?
Remember calls up, puts down. For a call, add the premium to the strike. For a put, subtract the premium from the strike. For spreads, apply the net premium to the long option's strike for debit spreads and the short option's strike for credit spreads.
How do I find max gain and max loss on a spread?
For a debit spread, max loss is the net debit and max gain is the difference between the strikes minus the debit. For a credit spread, max gain is the net credit and max loss is the difference between the strikes minus the credit.
How many shares does one option contract cover?
A standard equity option covers 100 shares, so multiply per-share premiums and gains by 100 to get dollar amounts.
Is a straddle bullish or bearish?
Neither. A long straddle profits from a big move in either direction; a short straddle profits if the stock stays near the strike. Both have two breakevens: the strike plus and minus the total premium.
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