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+306 Part Ill: Put Option Strategies 
+A straddle could be sold for 7 points. If the stock were above 38 and below 52 at expi­
+ration, the straddle writer would profit, since the in-the-money option could ht· 
+bought back for less than 7 points in that case, while the out-of-the-money option 
+expires worthless (Table 20-2). 
+TABLE 20-2. 
+The naked straddle write. 
+XYZ Price at Call Put Total 
+Expiration Profit Profit Profit 
+30 +$ 400 -$1,200 -$800 
+35 + 400 700 - 300 
+38 + 400 400 0 
+40 + 400 200 + 200 
+45 + 400 + 300 + 700 
+50 100 + 300 + 200 
+52 300 + 300 0 
+55 600 + 300 - 300 
+60 - 1,100 + 300 - 800 
+Notice that Figure 20-2 has a shape like a roof. The maximum potential profit 
+point is at the striking price at expiration, and large potential losses exist in either 
+direction if the underlying stock should move too far. The reader may recall that the 
+ratio call writing strategy - buying 100 shares of the underlying stock and selling two 
+calls - has the same profit graph. These two strategies, the naked straddle write and 
+the ratio call write, are equivalent. The two strategies do have some differences, of 
+course, as do all equivalent strategies; but they are similar in that both are highly 
+probabilistic strategies that can be somewhat complex. In addition, both have large 
+potential risks under adverse market conditions or if follow-up strategies are not 
+applied. 
+The investment required for a naked straddle is the greater of the requirement 
+on the call or the put. In general, this means that the margin requirement is equal to 
+the requirement for the in-the-money option in a simple naked write. This require­
+ment is 20% of the stock price plus the in-the-money option premium. The straddle 
+writer should allow enough collateral so that he can take whatever follow-up actions 
+he deems necessary without having to incur a margin call. If he is intending to close 
+out the straddle if the stock should reach the upside break-even point - 52 in the 
+example above - then he should allow enough collateral to finance the position with