505
OPTION TrAdINg STrATegIeS
to realize a profi  t, the futures price (as of the time of the option expiration) must penetrate the strike 
price by an amount greater than the premium ($10.10/oz in the above example). Note that in the 
out-of-the-money put position, price decreases that leave futures above the option strike price will 
still result in a maximum loss on the option. The long out-of-the-money put might be a particularly 
appropriate position for the trader expecting a large price decline, but also concerned about the pos-
sibility of a large price rise. 
 tabLe 35.5b     profit/Loss Calculations: Long put (Out-of-the-Money)  
(1) (2) (3) (4) (5)
Futures price at 
expiration ($/oz)
premium of august $1,100 
put at Initiation ($/oz)
$ amount of 
premium paid
Value of put 
at expiration
profit/Loss on 
position [(4) – (3)]
1,000 10.1 $1,010 $10,000 $8,990
1,050 10.1 $1,010 $5,000 $3,990
1,100 10.1 $1,010 $0 –$1,010
1,150 10.1 $1,010 $0 –$1,010
1,200 10.1 $1,010 $0 –$1,010
1,250 10.1 $1,010 $0 –$1,010
1,300 10.1 $1,010 $0 –$1,010
1,350 10.1 $1,010 $0 –$1,010
1,400 10.1 $1,010 $0 –$1,010
Price of August gold futures at option expiration
Futures price at time
of position initiation
Breakeven
price
= $1,089.90
Profit/loss at expiration ($)
1,000
7,500
10,000
5,000
−2,500
2,500
0
1,050 1,100 1,150 1,200 1,250 1,300 1,350 1,400
Strike price
    FIGURE   35.5b    Profi  t/loss Profi  le: long Put (Out-of-the-Money)