Consider two put options differing only by exercise price.The one with the higher exercise price has
A)the lower breakeven and lower profit potential
B)the lower breakeven and greater profit potential
C)the higher breakeven and greater profit potential
D)the higher breakeven and lower profit potential
E)the greater premium and lower profit potential

Question

Quizplus · Accepted Answer

A put option with a higher exercise price will have a higher breakeven point because the option is more expensive. However, it also has greater profit potential because the option can be exercised at a higher price, allowing for a larger gain if the underlying asset's price falls significantly.

Consider Two Put Options Differing Only by Exercise Price