Business and Personal Finance Dictionary

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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.
  
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