Break-even
Break-even · Break-even Point
The level of revenue or price at which a company or investment neither loses nor gains — it exactly covers costs.
What it is
Break-even is the point where revenues exactly equal costs — zero profit or loss. It is used in several contexts:
Operating break-even of a company: The revenue volume at which the company covers all fixed and variable costs. Break-even = Fixed Costs / (1 − Variable Costs / Revenue)
Options break-even: The underlying stock price at which an options strategy neither profits nor loses after paying the premium.
- →Call break-even = Strike + premium paid
- →Put break-even = Strike − premium paid
- →Straddle break-even = Strike ± premium (two levels)
Investment break-even: The price the stock must reach for you to recoup your entry (including transaction costs, dividends, etc.).
Operating leverage and break-even: Companies with high fixed costs have a higher break-even, but once it is crossed, profits grow faster (higher operating leverage).
Why track it
Break-even is a practical reference point when evaluating:
- →Options strategies — whether the stock move is sufficient to generate a profit
- →New projects (CAPEX) — when the investment pays back
- →An entire company — at what revenue level it stops losing money
Companies with a low break-even (asset-light, high gross margin) are more resilient in a recession.
Real-world example
MSFT Straddle before earnings:
- →Buy call $380 + put $380, total premium $15
- →Call break-even: $395, Put break-even: $365
- →If MSFT moves less than $15 in either direction → premium is lost
Operating break-even of a SaaS startup:
- →Fixed costs $10M/month, gross margin 80%
- →Break-even = $10M / 0.80 = $12.5M ARR per month