525
OPTION TrAdINg STrATegIeS
 In most cases, it will make more sense for the trader simply to buy an in-the-money put since the 
transaction costs will be lower. However, if a speculator is already short futures, the purchase of an 
out-of-the-money call might present a viable alternative to liquidating this position and buying an 
in-the-money put.   
 tabLe 35.12b      profit/Loss Calculations: Option-protected Short Futures—Short Futures + Long Out-
of-the-Money Call (Similar to Long In-the-Money put)  
(1) (2) (3) (4) (5) (6)
Futures price at 
expiration ($/oz)
premium of august $1,300 
Call at Initiation ($/oz)
$ amount of 
premium paid
profit/Loss on Short 
Futures position
Call Value at 
expiration
profit/Loss on position 
[(4) + (5) – (3)]
1,000 9.1 $910 $20,000 $0 $19,090
1,050 9.1 $910 $15,000 $0 $14,090
1,100 9.1 $910 $10,000 $0 $9,090
1,150 9.1 $910 $5,000 $0 $4,090
1,200 9.1 $910 $0 $0 –$910
1,250 9.1 $910 –$5,000 $0 –$5,910
1,300 9.1 $910 –$10,000 $0 –$10,910
1,350 9.1 $910 –$15,000 $5,000 –$10,910
1,400 9.1 $910 –$20,000 $10,000 –$10,910
    FIGURE   35.12b    Profi  t/loss Profi  le: Option-Protected Short Futures—Short Futures + long 
Out-of-the-Money Call (Similar to long In-the-Money Put) 
Price of August gold futures at option expiration ($/oz)
Futures price at time
of position initiation
Breakeven price = $1,190.90
Profit/loss at expiration ($)
1,000
10,000
15,000
20,000
5,000
−5,000
−10,000
−15,000
0
1,050 1,100 1,150 1,200 1,250 1,300 1,350 1,400
Strike price