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+346 Part Ill: Put Option Strategies 
+The bullish portion of this combination of calendar spreads would be set up by sell­
+ing the shorter-term January 70 call for 3 points and simultaneously buying the 
+longer-term April 70 call for 5 points. This portion of the spread requires a 2-point 
+debit. The bearish portion of the spread would be constructed using the puts. The 
+near-term January 60 put would be sold for 2 points, while the longer-term April 60 
+put would be bought for 3. Thus, the put portion of the spread is a I-point debit. 
+Overall, then, the combination of the calendar spreads requires a 3-point debit, plus 
+commissions. This debit is the required investment; no additional collateral is 
+required. Since there are four options involved, the commission cost will be large. 
+Again, establishing the spreads in quantity can reduce the percentage cost of com­
+missions. 
+Note that all the options involved in this position are initially out-of-the-money. 
+The stock is below the striking price of the calls and is above the striking price of the 
+puts. One has sold a near-term put and call combination and purchased a longer-term 
+combination. For nomenclature purposes, this strategy is called a "calendar combi­
+nation." 
+There are a variety of possible outcomes from this position. First, it should be 
+understood that the risk is limited to the amount of the initial debit, 3 points in this 
+example. If the underlying stock should rise dramatically or fall dramatically before 
+the near-term options expire, both the call spread and the put spread will shrink to 
+nearly nothing. This would be the least desirable result. In actual practice, the spread 
+would probably have a small positive differential left even after a premature move by 
+the underlying stock, so that the probability of a loss of the entire debit would be 
+small. 
+If the near-term options both expire worthless, a profit will generally exist at 
+that time. 
+Example: IfXYZ were still at 65 at January expiration in the prior example, the posi­
+tion should be profitable at that time. The January call and put would expire worth­
+less with XYZ at 65, and the April options might be worth a total of 5 points. The 
+spread could thus be closed for a profit with XYZ at 65 in January, since the April 
+options could be sold for 5 points and the initial "cost" of the spread was only 3 points. 
+Although commissions would substantially reduce this 2-point gross profit, there 
+would still be a good percentage profit on the overall position. If the strategist decides 
+to take his profit at this time, he would be operating in a conservative manner. 
+However, the strategist may want to be more aggressive and hold onto the April 
+combination in hopes that the stock might experience a substantial movement before 
+those options expire. Should this occur, the potential profits could be quite large.