270 Part Ill: Put Option Strategies 
2½; plus he has spent two commissions to date and would have to spend two more 
to liquidate the position. 
At this point, the strategist may decide to do nothing and take his chances that 
the stock will subsequently rally so that the July 45 put will expire worthless. 
However, if the stock continues to decline below 45, the spread will most certainly 
become more of a loss as both puts come closer to parity. 
This type of spread strategy is not as attractive as the "rolling-up" strategy. In 
the "rolling-up" strategy, one is not subjected to a loss if the stock declines after the 
spread is established, although he does limit his profits. The fact that the calendar 
spread strategy can lead to a loss even if the stock declines makes it a less desirable 
alternative. 
EQUIVALENT POSITIONS 
Before considering other put-oriented strategies, the reader should understand the 
definition of an equivalent position. Two strategies, or positions, are equivalent when 
they have the same profit potential. They may have different collateral or investment 
requirements, but they have similar profit potentials. Many of the call-oriented 
strategies that were discussed in Part II of the book have an equivalent put strategy. 
One such case has already been described: The "protected short sale," or shorting the 
common stock and buying a call, is equivalent to the purchase of a put. That is, both 
have a limited risk above the striking price of the option and relatively large profit 
potential to the downside. An easy way to tell if two strategies are equivalent is to see 
if their profit graphs have the same shape. The put purchase and the "protected short 
sale" have profit graphs with exactly the same shape (Figures 16-1 and 4-1, respec­
tively). As more put strategies are discussed, it will always be mentioned if the put 
strategy is equivalent to a previously described call strategy. This may help to clarify 
the put strategies, which understandably may seem complex to the reader who is not 
familiar with put options.