Chapter 06 · Section 6.1
Breakeven Point
Market Outlook : BULLISH
Profit Potential: limited to
the net premium
Loss Potential : limited
Breakeven Point :
The investor breaks even when the market price equals:
a) the higher exercise price less the net premium.
b) the lower exercise price less the net premium.
The maximum profit is limited to the premium received. At the lower exercise price, the investor is losing money. At the higher exercise price, the investor realizes his maximum profit.