Where your option breaks even
An option that you bought is not profitable the moment the price moves your way. It has to cover what you paid for it first.
Your numbers
In points.
What that gives you
Total move needed before you break even
220
- Of that, the part that is just the premium
- 120
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How this works
To break even on an option you bought, the price has to travel the distance to the strike and then far enough past it to cover the premium.
That second part is the one people leave out. A contract 100 points away bought for 120 needs 220 points of movement before you are level, not 100.
Everything beyond the breakeven is yours; everything short of it is not, however far the price came.
This one connects to
Cheap options that end up worth nothing
What this does not say: This is how the contract is built. It is not a view on any option, any strike, or whether a price will get there.