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+298 Part Ill: Put Option Strategies 
+Example: XYZ is 48 and the XYZ January 50 put is selling for 5 points. The profit 
+that could be made if the stock were unchanged at expiration would be only 3 points, 
+less commissions, since the put would have to be repurchased for 2 points with XYZ 
+at 48 at expiration. Commissions for the buy-back should be included as well, to 
+make the computation as accurate as possible. 
+As was the case with covered call writing, one can create several rankings of 
+naked put writes. One list might be the highest potential returns. Another list could 
+be the put writes that provide the rrwst downside protection; that is, the ones that 
+have the least chance of losing money. Both lists need some screening applied to 
+them, however. When considering the maximum potential returns, one should take 
+care to ensure at least some room for downside movement. 
+Example: If XYZ were at 50, the XYZ January 100 put would be selling at 50 also and 
+would most assuredly have a tremendously large maximum potential return. 
+However, there is no room for downside movement at all, and one would surely not 
+write such a put. One simple way of allowing for such cases would be to reject any 
+put that did not offer at least 5% downside protection. Alternatively, one could also 
+reject situations in which the return if unchanged is below 5%. 
+The other list, involving maximum downside protection, also must have some 
+screens applied to it. 
+Example: With XYZ at 70, the XYZ January 50 put would be selling for½ at most. 
+Thus, it is extremely unlikely that one would lose money in this situation; the stock 
+would have to fall 20 points for a loss to occur. However, there is practically nothing 
+to be made from this position, and one would most likely not ever write such a deeply 
+out-of-the-money put. 
+A minimum acceptable level of return must accompany the items on this list of 
+put writes. For example, one might decide that the return would have to be at least 
+12% on an annualized basis in order for the put write to be on the list of positions 
+offering the most downside protection. Such a requirement would preclude an 
+extreme situation like that shown above. Once these screens have been applied, the 
+lists can then be ranked in a normal manner. The put writes offering the highest 
+returns would be at the top of the more aggressive list, and those offering the high­
+est percentage of downside protection would be at the top of the more conservative 
+list. In the strictest sense, a more advanced technique to incorporate the volatility of 
+the underlying stock should rightfully be employed. As mentioned previously, that 
+technique is presented in Chapter 28 on mathematical applications.