# Between Strike and Break-Even

## SPX Index is between 1410 and 1444 at expiration

### Buy 1 SPX 1410 Call at \$34

With the SPX exercise settlement value exactly at the strike price of \$1410 at expiration, the 1410 call would be at-the-money and have no value.

With SPX at the break-even point of 1444 at expiration, the 1410 call would be in-the-money and exercised.

The cash settlement amount received upon exercise would be:

1444 (settlement value) – \$1410 (call strike price) = \$34 x \$100 = \$3,400

This amount of \$3,400 is the total cost of the call.

If the SPX exercise settlement value is between 1410 and 1444 at expiration, the 1410 call will also be in-the-money and would be exercised. The cash settlement amount received, however, would be less than the total cost of the call, resulting in a partial loss for the position.

For example, say the exercise settlement value is 1425 at expiration. The cash settlement amount received upon exercise would be:

1425 (settlement value) – \$1410 (call strike price) = \$15 x \$100 = \$1,500

SPX did rise in value, but not as much as anticipated. The call that originally cost a total of \$3,400 is now worth \$1,500, so the investor can recoup some of its initial purchase price and realize a partial loss.

\$3,400 total premium paid for call
\$1,500 cash settlement amount received at call’s exercise (or sale at intrinsic value)
\$1,900 partial loss

However, the call buyer could have earned interest on the \$136,600 not originally committed to this bullish position, which could offset some of the option loss.

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