Chapter 06 · Section 6.1

Maximum Potential Gains

Back to the September 40-45-50 butterfly. Of the choices listed below, your maximum potential gain at expiration is when:

a) the underlying is at 45.
b) the underlying is at 49 7/8.
• c) the underlying is at 40.
  Yes. You will realize your maximum downside profit when the underlying is at 40 or below. The maximum profit on the upside occurs when the market is at the high strike price or above. (In this case, 50 or above.) Continue
  d) the underlying is at 40 1/8.