Products & RisksQuestion 51 of 125
An investor sells 1 XYZ 30 put for a premium of 2. What is the maximum gain and the breakeven point?
a.Maximum gain unlimited; breakeven $32
b.Maximum gain $200; breakeven $32
c.Maximum gain $200; breakeven $28
d.Maximum gain $2,800; breakeven $28
Explanation
A short (written) put's maximum gain is the premium received, $200, kept if the stock stays at or above the 30 strike. Breakeven is the strike minus the premium, 30 - 2 = $28, and the maximum loss occurs if the stock falls toward zero.
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