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I need some help confirming if I am calculating the break even price correctly for both Bear Call Spread and Bull Put Spread.

For Bear Call Spread, I have:

breakEvenPrice = longLegStrike+(longLegCost-shortLegCost)

For Bull Put Spread, I have:

breakEvenPrice = longLegStrike+(longLegCost-shortLegCost)

Would these equation be correct? It seem for both they are the same.

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The potential problem with your formulas is that long legs are debits and short legs are credits. So longLegCost is a negative number.

An easier way is that the risk of a debit spread is its cost. For example, for an $85/$90 bull call spread that costs $3, the BE is $88.

The risk of a credit spread is the difference in strikes less the premium received. For example, for an $85/$90 bull put spread with a credit of $2, the BE is also $88.

Both have the potential to make $2 and the potential to lose $3.

Adjust your formulas accordingly.

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  • Hey, I got it to work now, mostly through trail and error, it was very complicated but at the end the result match the expected values perfectly. May 9 at 16:59

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