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+Chapter 23: Spreads Combining Calls and Puts 347 
+Example: If the stock were to undergo a very bullish move and rise to 100 before 
+April expiration, the April 70 call could be sold for 30 points. (The April 60 put would 
+expire worthless in that case.) Alternatively, if the stock plunged to 30 by April expi­
+ration, the put at 60 could be sold for 30 points while the call expired worthless. In 
+either case, the strategist would have made a substantial profit on his initial 3-point 
+investment. 
+It may be somewhat difficult for the strategist to decide what he wants to do 
+after the near-term options expire worthless. He may be torn between taking the lim­
+ited profit that is at hand or holding onto the combination that he owns in hopes of 
+larger profits. A reasonable approach for the strategist to take is to do nothing imme­
+diately after the near-term options expire worthless. He can hold the longer-term 
+options for some time before they will decay enough to produce a loss in the posi­
+tion. Referring again to the previous example, when the January options expire 
+worthless, the strategist then owns the April combination, which is worth 5 points at 
+that time. He can continue to hold the April options for perhaps 6 or 8 weeks before 
+they decay to a value of 3 points, even if the stock remains close to 65. At this point, 
+the position could be closed for a net loss of the .commission costs involved in the var­
+ious transactions. 
+As a general rule, one should be willing to hold the combination, even if this 
+means that he lets a small profit decay into a loss. The reason for this is that one 
+should give himself the maximum opportunity to realize large profits. He will proba­
+bly sustain a number of small losses by doing this, but by giving himself the oppor­
+tunity for large profits, he has a reasonable chance of having the profits outdistance 
+the losses. 
+There is a time to take small profits in this strategy. This would be when either 
+the puts or the calls were slightly in-the-money as the near-term options expire. 
+Example: IfXYZ moved to 71 just as the January options were expiring, the call por­
+tion of the spread should be closed. The January 70 call could be bought back for 1 
+point and the April 70 call would probably be worth about 5 points. Thus, the call 
+portion of the spread could be "sold" for 4 points, enough to cover the entire cost of 
+the position. The April 60 put would not have much value with the stock at 71, but it 
+should be held just in case the stock should experience a large price decline. Similar 
+results would occur on the put side of the spread if the underlying stock were slight­
+ly in-the-money, say at 58 or 59, at January expiration. At no time does the strategist 
+want to risk being assigned on an option that he is short, so he must always close the 
+portion of the position that is in-the-money at near-term expiration. This is only nec­
+essary, of course, if the stock has risen above the striking price of the calls or has fall­
+en below the striking price of the puts.