260 Part Ill: Put Option Strategies 
buyer can often purchase a longer-term option for very little extra money, thus gain­
ing more time to work with. Call option buyers are generally forced to avoid the 
longer-term series because the extra cost is not worth the risk involved, especially in 
a trading situation. However, the put buyer does not necessarily have this disadvan­
tage. If he can purchase the longer-term put for nearly the same price as the near­
term put, he should do so in case the underlying stock takes longer to drop than he 
had originally anticipated it would. 
It is not uncommon to see such prices as the following: 
XYZ common, 46: 
XYZ April 50 put, 4; 
XYZ July 50 put, 4½; and 
XYZ October 50 put, 5. 
None of these three puts have much time value premium in their prices. Thus, the 
buyer might be willing to spend the extra 1 point and buy the longest-term put. If the 
underlying stock should drop in price immediately, he will profit, but not as much as 
if he had bought one of the less expensive puts. However, should the underlying stock 
rise in price, he will own the longest-term put and will therefore suffer less of a loss, 
percentagewise. If the underlying stock rises in price, some amount of time value 
premium will come back into the various puts, and the longest-term put will have the 
largest amount of time premium. For example, if the stock rises back to 50, the fol­
lowing prices might exist: 
XYZ common, 50; 
XYZ April 50 put, l; 
XYZ July 50 put, 2½; and 
XYZ October 50 put, 3½. 
The purchase of the longer-term October 50 put would have suffered the least loss, 
percentagewise, in this event. Consequently, when one is purchasing an in-the­
money put, he may often want to consider buying the longest-term put if the time 
value premium is small when compared to the time premium in the nearer-term 
puts. 
In Chapter 3, the delta of an option was described as the amount by which one 
might expect the option will increase or decrease in price if the underlying stock 
moves by a fixed amount (generally considered to be one point, for simplicity). Thus, 
if XYZ is at 49 and a call option is priced at 3 with a delta of ½, one would expect the 
call to sell for 3½ with XYZ at 50 and to sell at 2¼ with XYZ at 48. In reality, the delta