Add training workflow, datasets, and runbook
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O.,ter 3: Call Buying
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TABLE 3-5.
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Original and spread positions compared.
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Stock Price Long Call
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at Expiration Result
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25 -$300
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30 - 300
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33 - 300
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35 - 300
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38 0
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40 + 200
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45 + 700
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FIGURE 3-2.
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Companion: original call purchase vs. spread.
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§
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~ +$200
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·5..
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~
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al
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tJ)
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.3
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0
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:1:
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e
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c.. -$300
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Stock Price at Expiration
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Spread
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Result
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-$300
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- 300
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0
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+ 200
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+ 200
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+ 200
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+ 200
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115
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With these prices, a 1-point debit would be required to roll down. That is, selling 2
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October 35 calls would bring in $300 ($150 each), but the cost of buying the October
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30 call is $400. Thus, the transaction would have to be done at a cost of $100, plus
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commissions. With these prices, the break-even point after rolling down would be 34,
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still well below the original break-even price of 38. The risk has now been increased
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by the additional 1 point spent to roll down. If XYZ should drop below 30 at October
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expiration, the investor would have a total loss of 4 points plus commissions. The
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maximum loss with the original long October 35 call was limited to 3 points plus a
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smaller amount of commissions. Finally, the maximum amount of money that the
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