matter of balancing tradeoffs and keeping to a realistic forecast. Securities offered through Ally Invest Securities, LLC. In that case, both put options expire worthless, and the loss incurred is simply the initial outlay for the position (the debit). Assume that on Friday afternoon the long put is deep-in-the-money, and that the short put is roughly at-the-money. The investor's maximum loss is capped at 350, or ( (8.50 - 2) x 1 contract x 100 shares. Implied volatility represents the consensus of the marketplace as to the future level of stock price volatility or the probability of reaching a specific price point. The potential profit is limited, but so is the risk should the stock unexpectedly rally. The worst that can happen at expiration is for the stock to be above the higher (long put) strike price. If the price of the underlying asset closes below 30 upon expiration, then the investor will realize a total profit of 200 ( shares/contract) - (475 - 175) or (500 - 300).