Chapter 06 · Section 6.1

Breakeven Point

Market Outlook  : VOLATILE
Profit Potential: limited on downside; 
                  unlimited on upside
Loss Potential  : limited
Breakeven Points:

The calls used in the construction of this backspread are priced as follows:
Long 110 call: $2.75
Short 100 call: $9.25
To which point must the market fall in order to breakeven?

c) -101.00
No. This is a 2:1 ratio backspread, not a 3:1 backspread.
d) -96.25
e) -106.25

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