Chapter 06 · Section 6.1

Profit Potential

Market Outlook   : BEARISH
Profit Potential :
Loss Potential   :
Breakeven Point  :

The investor's profit potential is:

b) limited.
Yes. When the market price falls to the lower exercise price, both out-of-the-money options will expire worthless. The maximum profit that the trader can realize is the net premium: The premium he receives for the call at the higher exercise price. Continue