O.,,er 16: Put Option Buying 263 
3, Sell the in-the-money long put and use part of the proceeds to purchase out-of­
the-money puts. 
4. Create a spread by selling an out-of-the-money put against the one he currently 
holds. 
These are the same four tactics that were discussed earlier with respect to call buy­
ing. In the fifth tactic, the holder of a listed put who has an unrealized profit might 
consider buying a listed call to protect his position. 
Example: A speculator originally purchased an XYZ October 50 put for 2 points when 
the stock was 52. If the stock has now fallen to 45, the put might be worth 6 points, 
representing an unrealized gain of 4 points and placing the put buyer in a position to 
implement one of these five tactics. After some time has passed, with the stock at 45, 
an at-the-money October 45 put might be selling for 2 points. Table 16-3 summarizes 
the situation. If the trader merely liquidates his position by selling out the October 50 
put, he would realize a profit of 4 points. Since he is terminating the position, he can 
make neither more nor less than 4 points. This is the most conservative of the tactics, 
allowing no additional room for appreciation, but also eliminating any chance of los­
ing the accumulated profits. 
TABLE 16-3. 
Background table for profit alternatives. 
Original Trade Current Prices 
XYZ common: 52 XYZ common: 45 
Bought XYZ October 50 put at 2 XYZ October 50 put: 6 
XYZ October 45 put: 2 
If the trader does nothing, merely continuing to hold the October 50 put, he is 
taking an aggressive action. If the stock should reverse and rise back above 50 by 
expiration, he would lose everything. However, if the stock continues to fall, he could 
build up substantially larger profits. This is the only tactic that could eventually result 
in a loss at expiration. 
These two simple strategies - liquidating or doing nothing are the easiest 
alternatives. The remaining strategies allow one to attempt to achieve a balance 
between retaining built-up profits and generating even more profits. The third tactic 
that the speculator could use would be to sell the put that he is currently holding and