Abstract：This paper analyzes the optimal switching of flexible product—mix using similar real option approach which is applied to study combined entry and exit strategies in project investment．The key assumptions are that one prod— uct—mix Can be perpetually produced while two product—mixes exist perpetually，the cash flow follows geometric Brownian motion，there exists switching cost，and only relative profitability of product．mix is considered in the opti— real decision making．By solving nonlinear set of equations，the effects of volatility，switching cost and correlation of product—mix Oil the optimal switching are analyzed via a numerical example． It shows that the triggering level of rela． tive profitability is increasing with the increases of volatility and switching cost，which is similar to other results in real option theoretical applications．Furthermore，the analysis of the effect of product．mix’S correlation on the opti— real switching demonstrates that all increase in the correlation decreases the trigering level of relative profitability．