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+Chapter 2: Covered Call Writing 83 
+write early. Of course, if the trade was done in a margin account, the writer will be 
+reducing the margin interest that he had planned to pay in the position, because the 
+debit will be erased earlier. In most cases, the increased commissions are very small 
+and the lost dividend is not significant compared to the increase in annualized return 
+that one can achieve by closing the position early. However, this is not always true, 
+and one should be aware of exactly what his costs are for closing the position early. 
+Obviously, getting out of a covered writing position can be as difficult as estab­
+lishing it. Therefore, one should place the order to close the position with his bro­
+kerage firm's option desk, to be executed as a "net" order. The same traders who facil­
+itate establishing covered writing positions at net prices will also facilitate getting out 
+of the positions. One would normally place the order by saying that he wanted to sell 
+his stock and buy the option "at parity" or, in the example, at "25 net." Just as it is 
+often necessary to be in contact with both the option and stock exchanges to estab­
+lish a position, so is it necessary to maintain the same contacts to renwve a position 
+at parity. 
+ACTION TO TAKE AT OR NEAR EXPIRATION 
+As expiration nears and the time value premium disappears from a written call, the 
+covered writer may often want to roll forward, that is, buy back the currently written 
+call and sell a longer-term call with the same striking price. For an in-the-money call, 
+the optimum time to roll forward is generally when the time value premium has com­
+pletely disappeared from the call. For an out-of-the-money call, the correct time to 
+move into the more distant option series is when the return offered by the near-term 
+option is less than the return offered by the longer-term call. 
+The in-the-money case is quite simple to analyze. As long as there is time pre­
+mium left in the call, there is little risk of assignment, and therefore the writer is 
+earning time premium by remaining with the original call. However, when the option 
+begins to trade at parity or a discount, there arises a significant probability of exer­
+cise by arbitrageurs. It is at this time that the writer should roll the in-the-money call 
+forward. For example, if XYZ were offered at 51 and the July 50 call were bid at 1, 
+the writer should be rolling forward into the October 50 or January 50 call. 
+The out-of-the-money case is a little more difficult to handle, but a relatively 
+straightforward analysis can be applied to facilitate the writer's decision. One can 
+compute the return per day remaining in the written call and compare it to the net 
+return per day from the longer-term call. If the longer-term call has a higher return, 
+one should roll forward.