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+94 Part II: Call Option Strategies 
+The selection of which call to write should be made on a comparison of avail­
+able returns and downside protection. One can sometimes write part of his position 
+out-of-the-money and the other part in-the-money to force a balance between return 
+and protection that might not otherwise exist. Finally, one should not write against an 
+underlying stock if he is bearish on the stock. The writer should be slightly bullish, or 
+at least neutral, on the underlying stock. 
+Follow-up action can be as important as the selection of the initial position 
+itself. By rolling down if the underlying stock drops, the investor can add downside 
+protection and current income. If one is unwilling to limit his upside potential too 
+severely, he may consider rolling down only part of his call writing position. As the 
+written call expires, the writer should roll forward into a more distant expiration 
+month if the stock is relatively close to the original striking price. Higher consistent 
+returns are achieved in this manner, because one is not spending additional stock 
+commissions by letting the stock be called away. An aggressive follow-up action can 
+also be taken when the underlying stock rises in price: The writer can roll up to a 
+higher striking price. This action increases the maximum profit potential but also 
+exposes the position to loss if the stock should subsequently decline. One would want 
+to take no follow-up action and let his stock be called if it is above the striking price 
+and if there are better returns available elsewhere in other securities. 
+Covered call writing can also be done against convertible securities - bonds or 
+preferred stocks. These convertibles sometimes offer higher dividend yields and 
+therefore increase the overall return from covered writing. Also, the use of warrants 
+or LEAPS in place of the underlying stock may be advantageous in certain circum­
+stances, because the net investment is lowered while the profit potential remains the 
+same. Therefore, the overall return could be higher. 
+Finally, the larger individual stockholder or institutional investor who wants to 
+achieve a certain price for his stock holdings should operate his covered writing strat­
+egy under the incremental return concept. This will allow him to realize the full prof­
+it potential of his underlying stock, up to the target sale price, and to earn additional 
+positive income from option writing.