CHAPCIJER 18 
Buying Puts in Conjunction 
with Call Purchases 
There are several ways in which the purchases of both puts and calls can be used to 
the speculator's advantage. One simple method is actually a follow-up strategy for the 
call buyer. If the stock has advanced and the call buyer has a profit, he might con­
sider buying a put as a means of locking in his call profits while still allowing for more 
potential upside appreciation. In Chapter 3, four basic alternatives were listed for the 
call buyer who had a profit: He could liquidate the call and take his profit; he could 
do nothing; he could "roll up" by selling the call for a profit and using part of the pro­
ceeds to purchase more out-of-the-money calls; or he could create a bull spread by 
selling the out-of-the-money call against the profitable call that he holds. If the 
underlying stock has listed puts, he has another alternative: He could buy a put. This 
put purchase would serve to lock in some of the profits on the call and would still 
allow room for further appreciation if the stock should continue to rise in price. 
Example: An investor initially purchased an XYZ October 50 call for 3 points when 
the stock was at 48. Sometime later, after the stock had risen to 58, the call would be 
worth about 9 points. If there was an October 60 put, it might be selling for 4 points, 
and the call holder could buy this put to lock in some of his profits. His position, after 
purchasing the put, would be: 
Long l October 50 call at 3 points N t t 7 • t - e cos: pom s Long l October 60 put at 4 points 
He would own a "strangle" - any position consisting of both a put and a call with dif­
fering terms - that is always worth at least 10 points. The combination will be worth 
exactly 10 points at expiration if XYZ is anywhere between 50 and 60. For example, 
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