jmh530

bull spread

profit: max(0,S-X1) - Max(0,S-X2) - c1 + c2
splitting up into ranges:
Payoff will be:
S < X1 --> 0
X1 < S < X2 --> S-X1 - 0 = S-X1
S > X2 -> S - X1 - (S-X2) = X2 - X1

Max Profit - will be the X2 - X1 - c1 + c2 (look at the place where there is no S)

Break even:
for breakeven --> look at the only payoff situation which has S anywhere in it.
it is where X1 < S < X2 --> Payoff is S-X1
Profit then is S-X1 - c1 + c2
if this profit is 0 -- for a breakeven S=X1+C1 - C2

CP