Chapter 06 · Section 6.1
Breakeven Point
Market Outlook : BEARISH
Profit Potential : practically
unlimited
Loss Potential : limited to the
amount of the
premium
Breakeven Point :
The trader's breakeven point is the exercise price:
a) plus the premium.
b) minus the premium.
To reach the point where the investor begins to realize a profit on his put option purchase he must recover the amount he paid for the option. Prices must move in a downward direction to enable the trader to profit.