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training_data/curated/text/bd85b873cc495fe1b4f5ff8ffee1cc8d8850b04ae2b0a506a6d43157e9521025.txt

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+354 Part Ill: Put Option Strategies 
+Even though five criteria have been stated, it is relatively easy to find a position that 
+satisfies all five conditions. The strategist may also be able to rely upon technical 
+input. If the stock seems to be in a near-term trading range, the position may be more 
+attractive, for that would indicate that the chances of the near-term combination 
+expiring worthless are enhanced. 
+The "calendar straddle" is a strategy that looks deceptively attractive. As the 
+reader should know by now, options do not decay in a linear fashion. Instead, options 
+tend to hold time value premium until they get quite close to expiration, when the 
+time value premium disappears at a fast rate. Consequently, the sale of a near-term 
+straddle and the simultaneous purchase of a longer-term straddle often appear to be 
+attractive because the debit seems small. Again, certain criteria can be set forth that 
+will aid in selecting a reasonably attractive position. The stock should be at or very 
+near the striking price when the position is established. Since this is basically a neu­
+tral strategy, one that offers the largest potential profits at near-term expiration, one 
+should want to sell the most time premium possible. This is why the stock must be 
+near the striking price initially. The underlying stock does not have to be a volatile 
+one, although volatile stocks will most easily satisfy the next two criteria. The near­
+term credit should be at least two-thirds of the longer-term debit. In the example 
+used to explain this strategy, the near-term straddle was sold for 5, while the longer­
+term straddle was bought for 7 points. Thus, the near-term straddle was worth more 
+than two-thirds of the longer-term straddle's price. Finally, the position should be 
+established with two to four months remaining until near-term expiration. If positions 
+with a longer time remaining are used, there is a significant probability that the 
+underlying stock will have moved some distance away from the striking price by the 
+time the near-term options expire. Summarizing, the three criteria for a "calendar 
+straddle" are: 
+1. Stock near striking price initially. 
+2. Two to four months remaining until near-term expiration. 
+3. Near-term straddle price at least two-thirds of longer-term straddle price. 
+The "diagonal butterfly" is the most difficult of these three types of positions to 
+locate. Again, one would like the stock to be near the middle striking price when the 
+position is established. Also, one would like the underlying stock to be somewhat 
+volatile, since there is the possibility that long-term options will be owned for free. If 
+this comes to pass, the strategist wants the stock to be capable of a large move in 
+order to have a chance of generating large profits. The most restrictive criterion -:­
+one that will eliminate all but a few possibilities on a daily basis - is that the near­
+term straddle price should be at least one and one-half times that of the longer-term,