266 Part Ill: Put Option Strategies 
TABLE 16-5. 
Results of adopting each of the five tactics. 
XYZ Price at "Roll Down" Do-Nothing Spread Liquidate Combine 
Expiration Profit Profit Profit Profit Profit 
30 + $3,000 (8) +$1,800 +$500 +$400 (W) +$1,500 
35 + 2,000 (8) + 1,300 + 500 + 400 (W) + 1,000 
41 + 800 (8) + 700 + 500 + 400 (W) + 400 
42 + 600 (8) + 600 (8) + 500 + 400 + 300 (W) 
43 + 400 + 500 (8) + 500 (8) + 400 + 200 (W) 
45 0(W) + 300 + 500 (8) + 400 0(W) 
46 0(W) + 200 + 400 (8) + 400 (8) O(W) 
48 0(W) 0(W) + 200 + 400 (8) 0(W) 
50 0 200 (W) 0 + 400 (8) 0 
54 0 200 (W) 0 + 400 (8) + 400 (8) 
60 0 200 (W) 0 + 400 + 1,000 (8) 
Note that each tactic is the best one under one of the scenarios, but that the spread 
tactic is never the worst of the five. The actual results of each tactic, using the figures 
from the example above, are depicted in Table 16-5, where B denotes best tactic and 
W denotes worst one. 
All the strategies are profitable if the underlying stock continues to fall dramat­
ically, although the "roll down," "do nothing," and combinations work out best, 
because they continue to accrue profits if the stock continues to fall. If the underly­
ing stock rises instead, only the combination outdistances the simplest tactic of all, 
liquidation. 
If the underlying stock stabilizes, the "do-nothing" and "spread" tactics work out 
best. It would generally appear that the combination tactic or the "roll-down" tactic 
would be the most attractive, since neither one has any risk and both could generate 
large profits if the stock moved substantially. The advantage for the spread was sub­
stantial in call options, but in the case of puts, the premium received for the out-of­
the-money put is not as large, and therefore the spread strategy loses some of its 
attractiveness. Finally, any of these tactics could be applied partially; for example, one 
could sell out half of a profitable long position in order to take some profits, and con­
tinue to hold the remainder.