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Breakeven Price
Breakeven price is the underlying price at which an options position reaches a defined zero profit or loss point under specified assumptions. For a simple long call held to expiration: Breakeven = Strike Price + Premium Paid For a simple long put held to expiration: Breakeven = Strike Price − Premium Paid
Why it matters to you
A call being ITM does not necessarily mean the buyer has made money. Suppose you buy a: $260 Call for: $10 At expiration, the simple breakeven is: $270 If the stock finishes at $265, the call is ITM by $5 but the position still loses money relative to the $10 premium paid. This distinction between: ITM and profitable is fundamental.
Terms that sit next to this one
Profit and Loss