Options break-even calculator
Break-even on a call is strike plus premium. On a put it is strike minus premium. On a covered call it is your cost basis minus the premium, which is the one people get wrong, because owning the shares changes the denominator of the whole trade.
The four cases
- Long call: strike + premium. You need the stock above that at expiry to make a dollar.
- Short call, naked: strike + premium. Same number, and above it you start losing without a ceiling.
- Long put: strike - premium.
- Short put: strike - premium. This is also your effective purchase price if you are assigned, which is the more useful way to think about it.
The covered call case is different
Once you own the shares, the option's break-even stops being the relevant number. What matters is the price at which the whole position, shares plus premium, is flat. That is cost basis minus premium.
Buy at 68, sell a call for 0.62, and your break-even is 67.38. The strike does not appear in that calculation at all. The strike decides your ceiling, not your floor.
Enter a cost basis above the strike and the calculator will show you a negative profit if called. That is the position telling you it cannot win: assignment locks in a share loss the premium does not cover. It happens to everyone who starts writing calls on a stock that already dropped, and the arithmetic is the only thing that will talk you out of it.
What break-even leaves out
Commissions and the bid-ask spread, both of which move it against you. Assignment fees at some brokers. Dividends, which move it in your favor if you hold the shares through an ex-date. And taxes, which are outside the scope of any break-even formula and are the reason the after-tax number on a short-term option trade can look very different from the pre-tax one.
Questions people actually ask
Does the break-even change if I roll?
Yes, and it is cumulative. Every net credit lowers your break-even, every net debit raises it. Track the running total across the whole position rather than recomputing from the latest contract, or you will lose the thread after the second roll.
Is break-even the same as max loss?
No. Break-even is where profit crosses zero. Max loss on a short put is the break-even times 100, reached only if the stock goes to zero. On a covered call the max loss is the same, because you own the shares.
Why does my broker show a different break-even?
Most brokers compute the option break-even in isolation, using the strike, rather than the position break-even using your basis. Both are correct answers to different questions. For a covered call, the basis version is the one that decides whether the trade makes money.