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training_data/relevant/text/cac70e7f23e4d1e4705266d2e5e9ec7baccd1b6c616c15e14c5a7bc90747140f.txt

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+t,r 20: The Sale ol a Straddle 305 
+now rolls the entire straddle - rolling down for protection, rolling up for an 
+ease in profit potential, and rolling forward when the time value premium of the 
+die dissipates. Rolling up or down would probably involve debits, unless one 
+led to a longer maturity. 
+Some writers might prefer to make a slight adjustment to the covered straddle 
+ting strategy. Instead of selling the put and call at the same price, they prefer to 
+ell an out-of-the-money put against the covered call write. That is, if one is buying 
+XYZ at 50 and selling the call, he might then also sell a put at 45. This would increase 
+his upside profit potential and would allow for the possibility of both options expir­
+ing worthless if XYZ were anywhere between 45 and 50 at expiration. Such action 
+would, of course, increase the potential dollars of risk if XYZ fell below 45 by expira­
+tion, but the writer could always roll the call down to obtain additional downside pro­
+tection. 
+One final point should be made with regard to this strategy. The covered call 
+writer who is writing on margin and is fully utilizing his borrowing power for call writ­
+ing will have to add additional collateral in order to write covered straddles. This is 
+because the put write is uncovered. However, the covered call writer who is operat­
+ing on a cash basis can switch to the covered straddle writing strategy without put­
+ting up additional funds. He merely needs to move his stock to a margin account and 
+use the collateral value of the stock he already owns in order to sell the puts neces­
+sary to implement the covered straddle writes. 
+THE UNCOVERED STRADDLE WRITE 
+In an uncovered straddle write, one sells the straddle without owning the underlying 
+stock. In broad terms, this is a neutral strategy with limited profit potential and large 
+risk potential. However, the probability of making a profit is generally quite large, 
+and methods can be implemented to reduce the risks of the strategy. 
+Since one is selling both a put and a call in this strategy, he is initially taking in 
+large amounts of time value premium. If the underlying stock is relatively unchanged 
+at expiration, the straddle writer will be able to buy the straddle back for its intrinsic 
+value, which would normally leave him with a profit. 
+Example: The following prices exist: 
+XYZ common, 45; 
+XYZ January 45 call, 4; and 
+XYZ January 45 put, 3.