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+206 Part II: Call Option Strategies 
+strikes versus one bear spread with a IO-point difference between strikes, the risk has 
+been balanced at both ends. When one uses strike prices that are not evenly spaced 
+apart, his margin requirement increases substantially. In such a case, one has to mar­
+gin the individual component spreads separately. Therefore, in this example, he 
+would have to pay for the two bull spreads ( $200 each, for a total of $400) and then 
+margin the additional call bear spread ($700: the $1,000 difference in the strikes, less 
+the $300 credit taken in for that portion of the spread). Hence, in this example, the 
+margin requirement would be $1,100, even though the risk is only $100. Technically, 
+of that $1,100 requirement, the spread trader pays out only $100 in cash (the actual 
+debit of the spread), and the rest of the requirement can be satisfied with excess 
+equity in his account. 
+The same analysis obviously applies whenever 5-point striking price intervals 
+exist. There are numerous combinations that could be worked out for lower-priced 
+stocks by merely skipping over a striking price ( using the 25's, 30's, and 40's, for exam­
+ple). Although there are not normally many stocks trading over $100 per share, the 
+same analysis is applicable using 130's, 140's, and 160's, for example. 
+FOLLOW-UP ACTION 
+Since the butterfly spread has limited risk by its construction, there is usually little 
+that the spreader has to do in the way of follow-up action other than avoiding early 
+exercise or possibly dosing out the position early to take profits or limit losses even 
+further. The only part of the spread that is subject to assignment is the call at the mid­
+dle strike. If this call trades at or near parity, in-the-money, the spread should be 
+closed. This may happen before expiration if the underlying stock is about to go ex­
+dividend. It should be noted that accepting assignment will not increase the risk of 
+the spread (because any short calls assigned would still be protected by the remain­
+ing long calls). However, the margin requirement would change substantially, since 
+one would now have a synthetic put (long calls, short stock) in place. Plus, there may 
+be more onerous commissions for trading stock. Therefore, it is usually wise to avoid 
+assignment in a butterfly spread, or in any spread, for that matter. 
+If the stock is near the middle strike after a reasonable amount of time has 
+passed, an unrealized profit will begin to accrue to the spreader. If one feels that the 
+underlying stock is about to move away from the middle striking price and thereby 
+jeopardize these profits, it may be advantageous to close the spread to take the avail­
+able profit. Be certain to include commission costs when determining if an unreal­
+ized profit exists. As a general rule of thumb, if one is doing 10 spreads at a time, he