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+160 Part II: Call Option Strategies 
+situation could arise to the downside. If:X'YZ were to plunge from 49 to 20, the ratio 
+writer would make a good deal of profit from the calls by rolling down, but may still 
+have a larger loss in the stock itself than the call profits can compensate for. 
+Many ratio writers who are large enough to diversify their positions into a num­
+ber of stocks will continue to maintain 2:1 ratios on all their positions and will simply 
+close out a position that has gotten out of hand by running dramatically to the upside 
+or to the downside. These traders believe that the chances of such a dramatic move 
+occurring are small, and that they will take the infrequent losses in such cases in 
+order to be basically neutral on the other stocks in their portfolios. 
+There is, however, a way to combat this sort of dramatic move. This is done by 
+altering the ratio of the covered write as the stock moves either up or down. For 
+example, as the underlying stock moves up dramatically in price, the ratio writer can 
+decrease the number of calls outstanding against his long stock each time he rolls. 
+Eventually, the ratio might decrease as far as 1:1, which is nothing more than a cov­
+ered writing situation. As long as the stock continues to move in the same upward 
+direction, the ratio writer who is decreasing his ratio of calls outstanding will be giv­
+ing more and more weight to the stock gains in the ratio write and less and less weight 
+to the call losses. It is interesting to note that this decreasing ratio effect can also be 
+produced by buying extra shares of stock at each new striking price as the stock 
+moves up, and simultaneously keeping the number of outstanding calls written con­
+stant. In either case, the ratio of calls outstanding to stock owned is reduced. 
+When the stock moves down dramatically, a similar action can be taken to 
+increase the number of calls written to stock owned. Normally, as the stock falls, one 
+would sell out some of his long stock and roll the calls down. Eventually, after the 
+stock falls far enough, he would be in a naked writing position. The idea is the same 
+here: As the stock falls, more weight is given to the call profits and less weight is given 
+to the stock losses that are accumulating. 
+This sort of strategy is more oriented to extremely large investors or to firm 
+traders, market-makers, and the like. Commissions will be exorbitant if frequent rolls 
+are to be made, and only those investors who pay very small commissions or who have 
+such a large holding that their commissions are quite small on a percentage basis will 
+be able to profit substantially from such a strategy. 
+ADJUSTING WITH THE DELTA 
+The delta of the written calls can be used to determine the correct ratio to be used in 
+this ratio-adjusting defensive strategy. The basic idea is to use the call's delta to 
+remain as neutral as possible at all times.