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.
• d) the underlying is at 40 1/8.
  No. Although you will be earning money at this point if the market falls to this point, it is not the maximum downside profit point.