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+Gapter 16: Put Option Buying 265 
+points. For example, if XYZ is at 46 at expiration, the put will be worth 4 and the call 
+worth l; or if XYZ is at 48, the put will be worth 2 and the call worth 3. If the stock 
+is above 50 or below 45 at expiration, the combination will be worth more than 5 
+points. Thus, the trader has no risk in this combination, since he has paid 5 points for 
+it and will be able to sell it for at least 5 points at expiration. In fact, if the underly­
+ing stock continues to drop, the put will become more valuable and he could build 
+up substantial profits. Moreover, if the underlying stock should reverse direction and 
+climb substantially, he could still profit, because the call will then become valuable. 
+This tactic is the best one to use if the underlying stock does not stabilize near 45, 
+but instead makes a relatively dramatic move either up or down by expiration. The 
+strategy of simultaneously owning both a put and a call is discussed in much greater 
+detail in Chapter 23. It is introduced here merely for the purposes of the put buyer 
+wanting to obtain protection of his unrealized profits. 
+Each of these five strategies may work out to be the best one under a different 
+set of circumstances. The ultimate result of each tactic is dependent on the direction 
+that XYZ moves in the future. As was the case with call options, the spread tactic 
+never turns out to be the worst tactic, although it is the best one only if the underly­
+ing stock stabilizes. Tables 16-4 and 16-5 summarize the results the speculator could 
+expect from invoking each of these five tactics. The tactics are: 
+1. Liquidate - sell the long put for a profit and do not reinvest. 
+2. Do nothing - continue to hold the long put. 
+3. "Roll down" - sell the long put, pocket the initial investment, and invest the 
+remaining proceeds in out-of-the-money puts at a lower strike. 
+4. "Spread" - create a spread by selling the out-of-the-money put against the put 
+already held. 
+5. "Combine" create a combination by buying a call at a lower strike while con­
+tinuing to hold the put. 
+TABLE 16-4. 
+Comparison of the five tactics. 
+By expiration, if XYZ ... 
+Continues to fall dramatically 
+Falls moderately further 
+Remains relatively unchanged 
+Rises moderately 
+Rises substantially 
+the best strategy was ... 
+"Roll down" 
+Do nothing 
+Spread 
+Liquidate 
+Combine 
+and the worst 
+strategy was ... 
+Liquidate 
+Combine 
+Combine or "roll down" 
+"Roll down" or do nothing 
+Do nothing