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training_data/relevant/text/57b74d94b39c41d3b3157e3cedc32f28e6ca7ebda60bb2d6dfd6e05b3723c57f.txt

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+Initial situation: OEX: 580 
+Option 
+June 590 call 
+June 600 call 
+A neutral spread would be: 
+Buy 2 June 600 calls 
+Sell I June 590 call 
+Implied Volatility 
+15% 
+14% 
+since the deltas are in the ratio of 2-to-l. 
+Part VI: Measuring and Trading Volatility 
+Delta 
+0.40 
+0.20 
+Now, suppose that OEX rises to 600 at a later date, but well before expiration. 
+This is not a particularly attractive price for this position. Recall that, at expiration, a 
+backspread has its worst result at the striking price of the purchased options. Even 
+prior to expiration, one would not expect to have a profit with the index right at 600. 
+However, the statistical advantage that the strategist had to begin with might be 
+able to help him out. The present situation would probably look like this: 
+Option 
+June 590 call 
+June 600 call 
+Implied Volatility 
+17% 
+16% 
+The June 600 call is now the at-the-money call, since OEX has risen to 600. As 
+such, its implied volatility will be 16% ( or whatever the "average" volatility is for OEX 
+at that time - the assumption is made that it is still 16% ). The June 590 call has a 
+slightly higher volatility (17%) because volatility skewing is still present. 
+Thus, the options that are long in this spread have had their implied volatility 
+increase; that is a benefit. Of course, the options that are short had theirs increase as 
+well, but the overall spread should benefit for two reasons: 
+1. Twice as many options are owned as were sold. 
+2. The effect of increased volatility is greatest on the at-the-money option; the in­
+the-money will be affected to a lesser degree. 
+All index options exhibit this volatility skewing. Volatility skewing exists in other 
+markets as well. The other markets where volatility skewing is prevalent are usually