Chapter 06 · Section 6.1
Breakeven Point
Market Outlook : BEARISH
Profit Potential : limited
Loss Potential : limited to
the net
premium paid
Breakeven Point :
The investor breaks even when the market price equals:
a) the lower exercise price less the net premium.
b) the higher exercise price less the net premium.
From the high exercise price, the strategy moves towards becoming profitable as the market price of the underlying decreases.