OptionsAcademy

Breakeven is the stock price at expiration where your trade results in $0 profit or loss.

Calculating Breakeven

Long Call: Strike + premium paid = $150 + $5 = $155

Long Put: Strike - premium paid = $150 - $5 = $145

Short Call: Strike + premium collected = $150 + $5 = $155 (if assignment, you lose at this price)

Short Put: Strike - premium collected = $150 - $5 = $145 (if assignment, you lose below this price)

For Spreads

Bull Call Spread: Lower strike + debit paid = $150 + $3 = $153

Bull Put Spread: Sold strike - credit collected = $150 - $3 = $147

Why It Matters

Breakevens show the profitable range for your trade.

Example bull call spread:

• Long $150 call, short $160 call, pay $3
• Breakeven = $153
• Max profit = $160 (stock closes above $160)
• Profitable zone = $153 - $160

Probability and Breakeven

Wider profitable range = higher probability of profit (but lower max profit). Narrow profitable range = lower probability of profit (but higher max profit per dollar risked).

Key Insight

You don't need the stock to move much. Just enough to cross your breakeven at expiration. Even small moves can be profitable.

Related: Max Profit, Max Loss, Risk Reward Ratio