Simple Equation

DrAnthonyRodriguez

New Member
Hi!

This is not a homework problem. I have the following equation:

(S - P) * (1 - X) = P * X

Where S is the spread (i.e., the difference) between two strike prices in dollars, P is the premium received for an option in dollars, and X is the probability of success.

I need to re-write the equation to solve for X. That is, I need to find out the probability to break even.

Thank You!

T.

j58

Active Member
Mukund, you made a sign error.

(s - p)(1 - x) = px
s - sx - p + px = px
sx = s - p
x = 1 - p/s