Articles on Stock markets

News, Research and Analysis

Help Center
Investment Portfolios
Investment Terminology and InstrumentsBasicsInvestment TerminologyTradingBondsMutual FundsExchange Traded Funds (ETF)StocksAnnuities
Technical Analysis and Trading
Cryptocurrencies and Blockchain
Retirement Accounts
Personal Finance
Corporate Basics

What is a Breakeven Price?

There will be a premium paid by investors for the right to establish positions using options. The price of the underlying security must move to a certain point for the options position to become profitable.

The strike price of an options contract names the price that an investor can use to buy or sell the underlying security, but the breakeven price will be the strike price plus the amount of the investor’s premium or net debit. Breakeven price can apply to a multi-option strategy such as a spread, or to a single option position.

If a call or put is written by an investor to create a short position, then the writer and the holder of the option will have the same breakeven point, but only one of them will profit if the price of the underlying ends up on either side of the breakeven point.

How are Option Prices Computed?
What is a Straddle?

Keywords: spread, options, writing options, net debit, breakeven price, premium,