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+70 Part II: Call Option Strategies 
+third of the position against near-term calls, one-third against middle-term calls, and 
+the remaining third against long-term calls - one can gain several benefits. First, all 
+of one's positions need not be adjusted at the same time. This includes either having 
+the stock called away or buying back one written call and selling another. Moreover, 
+one is not subject only to the level of option premiums that exist at the time one 
+series of calls expires. For example, if one writes only 9-month calls and then rolls 
+them over when they expire, he may unnecessarily be subjecting himself to the 
+potential of lower returns. If option premium levels happen to be low when it is time 
+for this 9-month call writer to sell more calls, he will be establishing a less-than-opti­
+mum write for up to 9 months. By spreading his writing out over time, he would, at 
+worst, be subjecting only one-third of his holding to the low-premium write. 
+Hopefully, premiums would expand before the next eXpiration 3 months later, and he 
+would then be getting a relatively better premium on the next third of his portfolio. 
+There is an important aside here: The individual or relatively small investor who 
+owns only enough stock to write one series of options should generally not write the 
+longest-term calls for this very reason. He may not be obtaining a particularly attrac­
+tive level of premiums, but may feel he is forced to retain the position until expira­
+tion. Thus, he could be in a relatively poor write for as long as 9 months. Finally, this 
+type of diversification may also lead to having calls at various striking prices as· the 
+market fluctuates cyclically. All of one's stock is not necessarily committed at one 
+price if this diversification technique is employed. 
+This concludes the discussion of how to establish a covered writing position 
+against stock. Covered writes against other types of securities are described later. 
+FOLLOW-UP ACTION 
+Establishing a covered write, or any option position for that matter, is only part of the 
+strategist's job. Once the position has been taken, it must be monitored closely so that 
+adjustments may be made should the stock drop too far in price. Moreover, even if 
+the stock remains relatively unchanged, adjustments will need to be made as the writ­
+ten call approaches expiration. 
+Some writers take no follow-up action at all, preferring to let a stock be called 
+away if it rises above the striking price at the expiration of the option, or preferring 
+to let the original expire worthless if the stock is below the strike. These are not 
+always optimum actions; there may be much more decision making involved. 
+Follow-up action can be divided into three general categories: