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Mike Butler: The Cost-Basis Trick That Widens Your Breakevens.
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ticker lesson
Breakdown
0:00lesson
Cost basis reduction defined
- Cost basis reduction improves success probability
- Example: 100 shares at $95 with covered call
- Credit received reduces cost basis to $91
2:00SNW· ticker
ServiceNow covered call example
- 100 shares at $95 with 100 strike call
- Premium credit reduces basis to $91
- Break-even at $91 with 2-day cycle
4:08MES· ticker
MES straddle cost basis
- 7,800 straddle with $974 credit
- Absorbs $1,000 variance below/above strike
- Break-evens at $6880/$8800
6:10lesson
Short put cost basis mechanics
- Short put reduces basis by $150
- Break-even at $8350
- Extrinsic value expands profit range
8:04lesson
High IV product benefits
- High IV = more extrinsic value
- Requires risk tolerance for volatility
- Small trade size mitigates variance
9:47lesson
Super bull/bear asymmetric trades
- Long call spread financed by short put
- Max profit $1,500 with 70% probability
- Neutral profit range with directional bias
11:30SPX· ticker
SPX long call financed by short put
- 300 strike long call offset by 125 short put
- $350 credit finances entire cost
- Break-even at 125 with 2-year horizon
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