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Breakeven point

• Is the level whereby an investor neither profits or loses. It is often used in options and other derivatives trading. Aside from transaction costs such as commissions, fees or spreads, there is usually a premium involved. For example, the breakeven point for a purchase call would be the strike price plus the premium to establish the effective breakeven strike price or breakeven level. In the case of a purchased put, it would be the strike price of the put adjusted by the paid premium. The market has to move down through the strike price by an amount equal to the premium paid. This effectively means that the breakeven level is lower than the contract's exercise price.

• (1) The point at which gains equal losses. (2) The market price that a stock must reach for an option buyer to avoid a loss if the Option is exercised. For a Call, it is the strike price plus the premium paid. For a Put, it is the strike price minus the premium paid.

 
 Embedded terms in definition
 Call
Derivatives
Exercise price
Exercise
Investor
Market
Options
Option
Plus
Point
Premium
Purchased put
Purchase
Put
Stock
Strike price
Trading
Transaction costs
 
 Related Terms
 Basis point
Break point
Cash flow break even point
Mid point
Operating breakeven point
Point
Point and figure chart
Price value of a basis point
Reorder point

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