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+168 Part II: Call Option Strategies 
+position. However, the position has naked options on both sides, and therefore has 
+tremendous liability. 
+In practice, professionals watch more than just the delta; they also watch other 
+measures of the risk of a position. Even then, price and volatility changes can cause 
+problems. Advanced risk concepts are addressed more fully in the chapter on 
+Advanced Concepts. 
+SUMMARY 
+Ratio writing is a viable, neutral strategy that can be employed with differing levels 
+of sophistication. The initial ratio of short calls to long stock can be selected simplis­
+tically by comparing one's opinion for the underlying stock with projected break-even 
+points from the position. In a more sophisticated manner, the delta of the written 
+calls can be used to determine the ratio. 
+Since the strategy has potentially large losses either to the upside or the down­
+side, follow-up action is mandatory. This action can be taken by simple methods such 
+as rolling up or down in a constant ratio, or by placing stop orders on the underlying 
+stock. A more sophisticated technique involves using the delta of the option to either 
+adjust the stock position or roll to another call. By using the delta, a theoretically neu­
+tral position can be maintained at all times. 
+Ratio writing is a relatively sophisticated strategy that involves selling naked 
+calls. It is therefore not suitable for all investors. Its attractiveness lies in the fact that 
+vast quantities of time value premium are sold and the strategy is profitable for the 
+most probable price outcomes of the underlying stock. It has a relatively large prob­
+ability of making a limited profit, if the position can be held until expiration without 
+frequent adjustment. 
+AN INTRODUCTION TO CALL SPREAD STRATEGIES 
+A spread is a transaction in which one simultaneously buys one option and sells 
+another option, with different terms, on the same underlying security. In a call 
+spread, the options are all calls. The basic idea behind spreading is that the strategist 
+is using the sale of one call to reduce the risk of buying another call. The short call in 
+a spread is considered covered, for margin purposes, only if the long call has an expi­
+ration date equal to or longer than the short call. Before delving into the individual 
+types of spreads, it may be beneficial to cover some general facts that pertain to most 
+spread situations.