Breakeven

What this point is

Break Even (Break Even) is the stock price at which the trade ends with no profit and no loss at expiration: for a call, the strike plus the premium, and for a put, the strike minus it. Composite structures have their own breakevens, derived from the net credit or debit.

Why it is the first number you work out

It turns a vague idea into a sharp question: do I really expect the stock to pass this level in this time frame? A “cheap” contract whose breakeven sits 12% above the price in two weeks is a bet on a rare event, and the number says so before you pay.

Expiration breakeven and path breakeven

The figure above is the expiration-day breakeven. Before then you can exit at a profit without reaching it, because it is enough for the contract's own price to rise (through a fast move or a jump in volatility). Mixing the two makes people wait for a level the trade never needed.

Hypothetical example

Stock at $100 and a call at strike $105 with a premium of $2: the expiration breakeven is $107. The stock jumps to $104 in two days: the contract sells for $3.40, a clear profit, and the stock never touched $107.

Common mistake

Ignoring the cost of entry and exit: spreads and commissions move the real breakeven away from the theoretical one. In thin contracts the spread alone can equal half the premium.

Expiration breakeven and path breakeven

The figure computed from strike and premium is the expiration-day breakeven. Before then you can exit at a profit without reaching it, because it is enough for the contract's own price to rise through a fast move or a volatility jump. Mixing the two makes people wait for a level the trade never needed.

Where to see it on the platform

The calculator works out the breakeven of every contract and structure instantly, and the payoff chart in the Greeks marks it on the curve with the zero line.

The calculator works out the breakeven of every contract and structure, and the payoff chart marks it with the zero line.