Break-even point


Refers to the price at which a transaction produces neither a gain nor a loss. In the context of options, the term has the additional definitions:
1. Long calls and short uncovered calls: strike price plus premium.
2. Long puts and short uncovered puts: strike price minus premium.
3. Short covered call: purchase price of underlying stock minus premium.
4. Short put covered by short stock: short sale price of underlying stock plus premium.

Investing Essentials

Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Fast market

Excessively rapid trading in a specific security that causes a delay in the electronic updating of its last sale and market conditions, particularly in options.

Subscribe to the Term of the Day via email Get the Term of the Day in your inbox!

Create your free portfolio