An investor buys a 30 put on a share of stock for a premium of $7 and simultaneously buys a share of stock for $26. The breakeven price on the position and the maximum gain on the position are, respectively: A) $33, unlimited. B) $21, $11. C) $30, unlimited. D) $37, $11.
Correct. Though I want to understand something. The way I see it, the breakeven price and maximum gain are both if the option is not exercised. Correct?
yes because he locked in a loss not a gain. when you cover your position you lock in a return - that is if you exercise the option. so exercising the option would limit your gain or loss if you are long and paid a premium that means that the max gain will be unlimited