366 Part Ill: Put Option Strategies 
on a case-by-case basis, the general philosophy should be to hold on to the April com­
bination. A profit is already guaranteed at this time - the worst that can happen is a 
3-point profit (the original credit). Consequently, the strategist should allow himself 
the opportunity to make large profits. The strategist may want to attempt to trade out 
of his long combination, since he will not risk making the position a losing one by 
doing so. Technical analysis may be able to provide him with buy or sell zones on the 
stock, and he would then consider selling out his long options in accordance with 
these technical levels. 
In summary, this strategy is very attractive and should be utilized by strategists 
who have the expertise to trade in positions with naked options. As long as risk man­
agement principles of taking small losses are adhered to, there will be a large proba­
bility of overall profit from this strategy. 
PUT OPTION SUMMARY 
This concludes the section on put option strategies. The put option is useful in a vari­
ety of situations. First, it represents a more attractive way to take advantage of a bear­
ish attitude with options. Second, the use of the put options opens up a new set of 
strategies - straddles and combinations - that can present reasonably high levels of 
profit potential. Many of the strategies that were described in Part II for call options 
have been discussed again in this part. Some of these strategies were described more 
fully in terms of philosophy, selection procedures, and follow-up action when they 
were first discussed. The second description the one involving put options - was 
often shortened to a more mechanical description of how puts fit into the strategy. 
This format is intentional. The reader who is planning to employ a certain strategy 
that can be established with either puts or calls (a bear spread, for example) should 
familiarize himself with both applications by a simultaneous review of the call chap­
ter and its analogous put chapter. 
The combination strategies generally introduced new concepts to the reader. 
The combination allows the construction of positions that are attractive with either 
puts or calls (out-of-the-money calendar spreads, for example) to be combined into 
one position. The four combination strategies that involve selling short-term options 
and simultaneously buying longer-term options are complex, but are most attractive 
in that they have the desirable features of limited risk and large potential profits.