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+Chapter 37: How Volatility Affects Popular Strategies 767 
+positively affect both the put and the call in a long straddle. Thus, if a straddle buyer 
+is careful to buy straddles in situations in which implied volatility is "low," he can 
+make money in one of two ways. Either (1) the underlying price makes a move great 
+enough in magnitude to exceed the initial cost of the straddle, or (2) implied volatil­
+ity increases quickly enough to overcome the deleterious effects of time decay. 
+Conversely, a straddle seller risks just the opposite - potentially devastating loss­
+es if implied volatility should increase dramatically. However, the straddle seller can 
+register gains faster than just the rate of time decay would indicate if implied volatil­
+ity decreases. Thus, it is very important when selling options - and this applies to cov­
+ered options as well as to naked ones - to sell only when implied volatility is "high." 
+A strangle is the same as a straddle, except that the call and put have different 
+striking prices. Typically, the call strike price is higher than the put strike price. 
+Naked option sellers often prefer selling strangles in which the options are well out­
+of-the-money, so that there is less chance of them having any intrinsic value when 
+they expire. Strangles behave much like straddles do with respect to changes in 
+implied volatility. 
+The concepts of straddle ownership will be discussed in much more detail in the 
+following chapters. Moreover, the general concept of option buying versus option 
+selling will receive a great deal of attention. 
+CALL BULL SPREADS 
+In this section, the bull spread strategy will be examined to see how it is affected by 
+changes in implied volatility. Let's look at a call bull spread and see how implied 
+volatility changes might affect the price of the spread if all else remains equal. Make 
+the following assumptions: 
+Assumption Set 1 : 
+Stock Price: 1 00 
+Time to Expiration: 4 months 
+Position: long Call Struck at 90 
+Short Call Struck at 110 
+Ask yourself this simple question: If the stock remains unchanged at 100, and implied 
+volatility increases dramatically, will the price of the 90-110 call bull spread grow or 
+shrink? Answer before reading on. 
+The truth is that, if implied volatility increases, the price of the spread will 
+shrink. I would suspect that this comes as something of a surprise to a good number 
+of readers. Table 37-6 contains some examples, generated from a Black-Scholes