Strike price + Option premium cost + Commission and transaction costs = Break-even price

So if you’re buying a December 50 call on ABC stock that sells for a \$2.50 premium and the commission is \$25, your break-even price would be

\$50 + \$2.50 + 0.25 = \$52.75 per share

That means that to make a profit on this call option, the price per share of ABC has to rise above \$52.75.

To calculate the break-even price for a put option, you subtract the premium and the commission costs. For a December 50 put on ABC stock that sells at a premium of \$2.50, with a commission of \$25, your break-even point would be

\$50 – \$2.50 – 0.25 = \$47.25 per share

That means the price per share of ABC stock must fall below \$47.25 for you to make a profit.

Make sure that you understand the fee structure used by your broker before making any option trades. Fees differ significantly from one broker to the next. Brokers frequently charge round-trip fees, which refer to the fees that you’re charged on the way in and on the way out of an options trading position. To figure out round-trip commission fees in the break-even formula, simply double the commission cost.