The breakeven point is the price level at which the market price of a security is equal to the original cost. For options trading, the breakeven point is the market price that a stock must reach for an option buyer to avoid a loss if they exercise the option.

For a call buyer, the breakeven point is the strike price plus the premium paid, while breakeven for a put position is the strike price minus the premium paid.

Investors use options to purchase the right to buy or sell a particular stock at a specific price. To make decisions about an option position, an investor needs to know if the market price of the stock generates a gain or loss, which is why the breakeven level is important. The breakeven point is also used to determine when a put option trade is profitable.

Accountants define breakeven as the sales level that pays for all costs and that generates a profit of zero. Managers calculate the breakeven sales level to cover all of the company's cost and to forecast a desired level of profit.

Breakeven can be calculated based on units sold or by using the total dollar amount of sales, and the breakeven formula can be adjusted to estimate a target level of profitability. Dictionary Term Of The Day.

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