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training_data/curated/text/a5d6aab5fa59ffe929a58064a9a4b319acd5dd309545f56f32b4e85a790b7730.txt

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+OPTION TrAdINg STrATegIeS
+in the above example the maximum gain exceeds the maximum risk by a factor of 4 to 1, there is 
+a greater probability of a net loss on the trade, since prices must decline by $60/oz before a profit 
+is realized.
+In this type of spread, the trader achieves a bearish position at a fairly low premium cost at the 
+expense of sacrificing the potential for unlimited gains in the event of a very sharp price decline. This 
+strategy might be appropriate for the trader expecting a price decline but viewing the possibility of a 
+very large price slide as being very low .
+Strategy 19b: bear Call Money Spread (Short Call with Lower Strike 
+price/Long Call with higher Strike price)—Case 2
+example. Buy an August $1,300 gold futures call at a premium of $9.10/oz ($9.10) and simultane-
+ously sell an August $1,200 gold futures call at a premium of $38.80/oz ($3,880), with August gold 
+futures trading at $1,200/oz. (See Table 35.19b and Figure 35.19b.)
+Comment. In contrast to the previous strategy, which involved two in-the-money calls, this illustra-
+tion is based on a spread consisting of a short at-the-money call and a long out-of-the-money call. 
+In a sense, this type of trade can be thought of as a short at-the-money call position with built-in 
+stop-loss protection. (The long out-of-the-money call will serve to limit the risk in the short at-the-
+money call position.) This risk limitation is achieved at the expense of a reduction in the net premium 
+received by the seller of the at-the-money call (by an amount equal to the premium paid for the out-
+of-the-money call). This trade-off between risk exposure and the amount of net premium received 
+is illustrated in Figure 35.19b, which compares the outright short at-the-money call position to the 
+above spread strategy.
+tabLe 35.19b  profit/Loss Calculations: bear Call Money Spread (Short Call with Lower Strike price/Long 
+Call with higher Strike price); Case 2—Short at-the-Money Call/Long Out-of-the-Money 
+Call
+(1) (2) (3) (4) (5) (6) (7) (8)
+Futures price 
+at expiration 
+($/oz)
+premium of 
+august $1,300 
+Call ($/oz)
+$ amount 
+of premium 
+paid
+premium of 
+august $1,200 
+Call ($/oz)
+$ amount 
+of premium 
+received
+Value of 
+$1,300 Call at 
+expiration
+Value of 
+$1,200 Call at 
+expiration
+profit/Loss on 
+position  
+[(5) − (3) + (6) − (7)]
+1,000 9.1 $910 38.8 $3,880 $0 $0 $2,970
+1,050 9.1 $910 38.8 $3,880 $0 $0 $2,970
+1,100 9.1 $910 38.8 $3,880 $0 $0 $2,970
+1,150 9.1 $910 38.8 $3,880 $0 $0 $2,970
+1,200 9.1 $910 38.8 $3,880 $0 $0 $2,970
+1,250 9.1 $910 38.8 $3,880 $0 $5,000 –$2,030
+1,300 9.1 $910 38.8 $3,880 $0 $10,000 –$7,030
+1,350 9.1 $910 38.8 $3,880 $5,000 $15,000 –$7,030
+1,400 9.1 $910 38.8 $3,880 $10,000 $20,000 –$7,030