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.
b) the higher exercise price plus the net premium.
The trader receives a net premium. The maximum profit is the net premium
and is reached when the market price equals the low exercise price.