Chapter 06 · Section 6.1

Breakeven Point

Market Outlook  : BEARISH
Profit Potential: limited to 
                  the net premium
loss Potential   :  limited
Breakeven Point  :

The investor breaks even when the market price equals:

a) the lower exercise price plus the net premium.
Yes. The strategy becomes profitable as the market price declines. Since the trader is receiving a net premium, the market price does not have to fall as low as the lower exercise price to breakeven. Continue
b) the higher exercise price plus the net premium.