Chapter 06 · Section 6.1

Breakeven Point

Market Outlook   :  STABLE
Profit Potential :  limited
Loss Potential   :  practically unlimited
Breakeven Points :

The breakeven points occur when market price at expiration equals...

• a) ...the high exercise price minus the premium.
  No. Premium are paid for both the call and the put. Thus, one simply calculates the breakeven for each, taking into account that two premiums are paid out.
  b) ...the high exercise price plus the premium.
  c) ...the low exercise price minus the premium.
  d) ...the low exercise price plus the premium.
  e) b and c
  f) b and d

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