Chapter 06 · Section 6.1

Breakeven Point

Market Outlook   :  STABLE
Profit Potential :  limited to 
                    high ex. 
                    low ex. - 
                    net premium
Loss Potential   :  limited if 
                    market falls
                 :  unlimited if 
                    market rises
Breakeven Points :

a) ...the high exercise price minus the maximum profit.
b) ...the high exercise price plus the maximum profit.
c) ...the low exercise price minus the maximum profit.
d) ...the low exercise price plus the maximum profit.
e) a and b
• f) c and d
  No. This question asks where the breakeven points occur in relation to the maximum profit of the position. Looking at the graph, you can see that this would involve the high exercise price, not the low.

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