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+Chapter 37: How Volatility Affects Popular Strategies 773 
+very expensive options. If he buys them now and implied volatility returns to its 
+median range near 50%, he will suffer from the decrease in implied volatility. 
+As a possible remedy, he considers selling an out-of-the-money put credit 
+spread at the same time that he buys the calls. The credit from this spread will act as 
+a means of reducing the net cost of the calls. If he's right and the stock goes up, all 
+will be well. However, the introduction of the put spread into the mix has introduced 
+some additional downside risk. 
+Suppose the following prices exist: 
+XYZ: 100 
+July 100 call: 10 (as stated above) 
+July 90 put: 5 
+July 80 put: 2 
+The entire bullish position would now consist of the following: 
+Buy 1 July 100 call at 1 0 
+Buy 1 July 80 put at 2 
+Sell 1 July 90 put at 5 
+Net expenditure: 7 point debit (plus commission) 
+Figure 37-6 shows the profitability, at expiration, of both the outright call pur­
+chase and the bullish position constructed above. 
+FIGURE 37-6. 
+Profitability at expiration. 
+2000 
+Bullish Spread // 
+/ 
+1000 
+"' "' 0 ...J 
+87 :!:: 
+Outright Call Purchase 
+e 0 
+C. 70 80 90 
+<Ft 100 /100 ,,....... ___ 
+120 
+-1000 
+Stock 
+-2000