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+Chapter 23: Spreads Combining Calls and Puts 
+FIGURE 23-1. 
+Call buy and put credit (bull) spread. 
++$2,000 
++$1,000 
+(/J 
+(/J 
+0 ..J 
+0 $0 -e a. 
+-$1,000 
+-$2,000 
+70 80 
+.... ,, -----,, -=-----' 
+THE BEARISH SCENARIO 
+~ Spread at Expiration 
+Call Buy Only, at Expiration 
+341 
+Stock 
+In a similar manner, one can construct a position to take advantage of a bearish opin­
+ion on a stock. Again, this would be most useful when the options were overpriced 
+and one felt that an at-the-money put was too expensive to purchase by itself. 
+Example: XYZ is trading at 80, and one has a definite bearish opinion on the stock. 
+However, the December 80 put, which is selling for 8, is expensive according to an 
+option analysis. Therefore, one might consider selling a call credit spread (out-of-the­
+money) to help reduce the cost of the put. The entire position would thus be: 
+Buy 1 December 80 put: 
+Sell l December 90 call: 
+Buy 1 December 100 call: 
+Total cost: 
+8 debit 
+4 credit 
+2 debit 
+6 debit ($600) 
+The profitability of this position is shown in Figure 23-2. The straight line on that 
+graph shows how the position would behave at expiration. The introduction of the 
+call credit spread has increased the risk to $1,600 if the stock should rally to 100 or 
+higher by expiration. Note that the risk is limited since both the put purchase and the 
+call credit spread are limited-risk strategies. The margin required would be this max­
+imum risk, or $1,600.