Series 7 practice questionmediumOptions — Breakeven Calculations
An investor buys 1 GHI Jul 50 put at $4. What is the breakeven point?
- A$54
- B$50
- C$46✓ Correct answer
- D$44
Explanation
Why C — $46
The breakeven point for a long put is the strike price minus the premium paid: $50 - $4 = $46. At $46, the $4 intrinsic value (right to sell at $50 when stock is at $46) exactly offsets the $4 premium. Below $46, the investor profits.
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