Add training workflow, datasets, and runbook

training_data/relevant/text/a230f15fcbca36aeefbf69409504e9bac534309658666e5b9a04cf913a513eff.txt

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+FIGURE 37-8. 
+Put credit (bull) spread profit in 30 days. 
+1000 
+500 
+- 1000 _ _,±8± 
+Assignment Risk Area 
+IV=30% 
+Stock 
+Part VI: Measuring and Trading Volatility 
+-~ 
+IV= 30% 
+130 140 
+First, one can observe that a bull put spread does not widen out to anywhere 
+near its maximum potential if implied volatility increases. The same thing was seen 
+with the call bull spread in the previous section. But a put bull spreader is caught in 
+another trap: If implied volatility falls and the stock falls too, the risk of early assign­
+ment materializes quicky. Note the shaded area at the lower left of the graph, extend­
+ing from a price of about 94 on down. After thirty days (so there would be three 
+months life remaining at that point in time), if implied volatility is 30%, the 110 put 
+(the short put) would be trading at parity for stock prices of 94 and below. Thus, it 
+would be at risk of early assignment. If implied volatility were even lower, the puts 
+would be at parity for much higher stock prices. 
+Now, in and of itself, early assignment on an equity or futures put spread is not 
+necessarily a terrible thing. There will be a request for additional margin (because 
+the stock has to be paid for or the futures contract margined), but the risk is still the 
+same in dollar terms. Of course, the request for extra margin could be backbreaking 
+for a stock trader if he can't afford to fully pay for the stock, and the early assignment 
+would probably incur additional commission costs, too. However, with cash-based 
+index options there is a more serious increase in risk after an early assignment, 
+because one is left with only the long side of the spread. If that option happens to 
+have substantial value, then there is considerable risk if the underlying should quick­
+ly move higher. In fact, by the time one unwinds the spread, he might actually end 
+up losing more than his original limited risk amount - all due to the early assignment. 
+(This could happen if the underlying first plunges in price, placing both options