From Theory To Practice

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Break-Even Subtleties

From Theory To Practice

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

One of the more fundamental components to your position, regardless of which side of the market you’re on, is going to be your break-even point. This is literally the point at which your net result on the position is zero – no gain, no loss. At least, this is the case at expiration. As a beginner trader, it can be frustrating to see the underlying instrument move to your break-even point prior to expiration, only to see your position at a loss. As we see in today’s segment, this is because the market is multi-dimensional, and an option’s value is influenced by more than just the underlying price.

NOTE: The original slides had the "Xsc and Xsp" on slide #3, so that is why you see Dr. Jim reference this mistake. The slides in the archive are accurate.

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