276  •   The Intelligent Option Investor
If someone wanted to make extra income by selling calls to accept expo-
sure to the stock’s upside, what price would they likely charge for someone 
wanting to buy this call option?
a. Almost nothing
b. A little
c. A good bit
Obviously, the correct answer to the put option question is c. This option 
would be pretty expensive because its range of exposure overlaps with so 
much of the BSM cone. Conversely, the answer to the call option question 
is a. This option would be really cheap because its range of exposure is well 
above the BSM cone.
Remember, though, that we have our crystal ball, and we know 
that this stock will likely be somewhere between $70 and $110 per share  
in a few years. With this confidence, wouldn’t it make sense to take the 
opposite side of both the preceding trades? Doing so would look like 
this:
5/18/2012
10
20
30
40
50
60
70
80
90
100
110
120
5/20/2013 249 499 749 999
Date/Day Count
Advanced Building Corp. (ABC)
Stock Price
Best Case, 110
Worst Case, 70
-
GREEN
RED
In this investment, which I explain in detail in Chapter 11, we are 
receiving a good bit of money by selling an expensive put and paying