Chapter 06 · Section 6.1
Breakeven Point
Market Outlook : VOLATILE
Profit Potential : limited on upside,
practically
unlimited on
downside
Loss Potential : limited
Breakeven Points :
The low breakeven point indicated on the graph is equal to the lower of the two exercise prices...
a) plus the call premiums paid, minus the net premiums received.
b) minus the call premiums paid, minus the net premiums received.
Think about it graphically. In order to move to the lower breakeven point, you have to start at the lower exercise price and move backward.