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+156 Part II: Call Option Strategies 
+that if XYZ is anywhere between 60 and 70 at expiration, the stock will be called away 
+at 60 against the sale of the October 60 call, and the October 70 call will expire worth­
+less. It makes no difference whether the stock is at 61 or at 69; the same result will 
+occur. Table 6-5 and Figure 6-3 depict the results from this variable hedge at expira­
+tion. In the table, it is assumed that the option is bought back at parity to close the 
+position, but if the stock were called away, the results would be the same. 
+Note that the shape of Figure 6-3 is something like a trapezoid. This is the 
+source of the name "trapezoidal hedge," although the strategy is more commonly 
+known as a variable hedge or variable ratio write. The reader should observe that the 
+maximum profit is indeed obtained if the stock is anywhere between the two strikes 
+at eiqJiration. The maximum profit potential in this position, $600, is smaller than the 
+maximum profit potential available from writing only the October 60's or only the 
+October 70's. However, there is a vastly greater probability of realizing the maximum 
+profit in a variable ratio write than there is of realizing the maximum profit in a nor­
+mal ratio write. 
+The break-even points for a variable ratio write can be computed most quickly 
+by first computing the maximum profit potential, which is equal to the time value 
+that the writer takes in. The break-even points are then computed directly by sub­
+tracting the points of maximum profit from the lower striking price to get the down­
+side break-even point and adding the points of maximum profit to the upper striking 
+price to arrive at the upside break-even point. This is a similar procedure to that fol­
+lowed for a normal ratio write: 
+TABLE 6-5. 
+Results at expiration of variable hedge. 
+XYZ Price at XYZ October 60 October 70 Total 
+Expiration Profit Profit Profit Profit 
+45 -$2,000 +$ 800 +$ 300 -$900 
+50 - 1,500 + 800 + 300 - 400 
+54 - 1,100 + 800 + 300 0 
+60 500 + 800 + 300 + 600 
+65 0 + 300 + 300 + 600 
+70 + 500 - 200 + 300 + 600 
+76 + 1,100 - 800 300 0 
+80 + 1,500 -$1,200 700 - 400 
+85 + 2,000 -1,700 - 1,200 - 900