Chapter 06 · Section 6.1

Maximum Potential Gain

Your maximum potential gain at expiration is when:

a) the underlying is at 40
b) the underlying is at 45
c) the underlying is at 50
• d) the underlying is at 55
  No. The position will have lost money if the underlying is at 55 at expiration. Consider only the three strike prices of the options used. Since the position is a stable market strategy, the maximum profit would occur at the middle strike price.