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+686 Part V: Index Options and Futures 
+The two theoretically attractive strategies are: 
+1. Buy out-of-the-money puts and sell at-the-money puts; or 
+2. Buy at-the-money calls and sell out-of-the-money calls. 
+One might just buy one cheap and sell one expensive option - a bear spread 
+with the puts, or a bull spread with the calls. However, it is better to implement these 
+spreads with a ratio between the number of options bought and the number sold. 
+That is, the first strategy involving puts would be a backspread, while the second 
+strategy involving calls would be a ratio spread. By doing the ratio, each strategy is a 
+more neutral one. Each strategy is examined separately. 
+BACKSPREAD/NG THE PUTS 
+The backspread strategy works best when one expects a large degree of volatility. 
+Implementing the strategy with puts means that a large drop in price by the under­
+lying futures would be most profitable, although a limited profit could be made if 
+futures rose. Note that a moderate drop in price by expiration would be the worst 
+result for this spread. 
+Example: Using prices from the above example, suppose that one decides to estab­
+lish a backspread in the puts. Assume that a neutral ratio is obtained in the following 
+spread: 
+Buy 4 January bean 550 puts 31/4 
+Sell 1 January bean 600 put at 28 
+Net position: 
+13 DB 
+28 CR 
+15 Credit 
+The deltas (see Table 34-2) of the options are used to compute this neutral ratio. 
+Figure 34-1 shows the profit potential of this spread. It is the typical picture for 
+a put backspread - limited upside potential with a great deal of profit potential for 
+large downward moves. Note that the spread is initially established for a credit of 15 
+cents. If January soybeans have volatile movements in either direction, the position 
+should profit. Obviously, the profit potential is larger to the downside, where there 
+are extra long puts. However, if beans should rally instead, the spreader could still 
+make up to 15 cents ($750), the initial credit of the position. 
+Note that one can treat the prices of soybean options in the same manner as he 
+would treat the prices of stock options in order to determine such things as break­
+even points and maximum profit potential. The fact that soybean options are worth