Break-Even
The break-even is the underlying price at which an options position makes neither a profit nor a loss at expiration.
For a long call it is the strike plus the premium paid; for a long put, the strike minus the premium. Multi-leg strategies can have one or two break-evens.
Break-even shows how far the underlying must move just to recover the premium before any profit accrues.
Example. Buying a 100-strike call for $4 has a break-even of $104 — the stock must close above $104 at expiration for the trade to profit.
FAQ
How do I calculate break-even on a call?
Add the premium paid to the strike: a 50-strike call bought for $2 breaks even at $52 at expiration.
Can a strategy have two break-evens?
Yes — straddles, strangles, and condors have an upper and a lower break-even bracketing a profit or loss zone.
Related terms
See also: Bull Call Spread