What is the breakeven point for selling a CALL option?

The breakeven point for selling a call option is determined by the formula where you add the strike price to the premium received for selling the option. When an investor sells a call option, they collect a premium, which offsets the obligation they have if the underlying asset’s price rises above the strike price.

At expiration, if the price of the underlying asset is at or below the strike price, the option will likely expire worthless for the buyer, allowing the seller to keep the premium as profit. However, if the price exceeds the strike price, the seller starts to incur losses once the price surpasses the sum of the strike price and the premium received. Thus, the seller's breakeven point—the price at which they neither gain nor lose—is calculated by adding the strike price and the premium together. This is crucial in option trading as it helps to assess risk and potential profitability.