An investor purchases ABC stock at $71 per share and executes a protective put strategy. The put option used in the strategy has a strike price of $66, expires in two months, and is purchased for $1.45. At expiration, the protective put strategy breaks even when the price of ABC is closest to:
To break even, the underlying stock must be at least as high as the amount expended up front to establish the position. To establish the protective put, the investor would have spent $71 + $1.45 =$72.45.