Chapter 06 · Section 6.1
Profit Potential
Market Outlook : BEARISH Profit Potential : Loss Potential : Breakeven Point :
The investor's profit potential is:
a) unlimited.
b) limited.
If the market falls, the options will expire worthless and he will realize a gain on the net premium: he has received more for writing the call at a lower exercise price than he has paid for buying the call at a higher exercise price.