Chapter 2: Covered Call Writing 
FIGURE 2-5. 
Comparison: original write vs. rolled-up position. 
+$1,200 
Rolled-Up Write 
+$600 Original Write 
54 60 
Stock Price at Expiration 
81 
ment of risk is introduced as well as the possibility of increased rewards. Generally, 
it is not advisable to roll up if at least a 10% correction in the stock price cannot be 
withstood. One's initial goals for the covered write were set when the position was 
established. If the stock advances and these goals are being met, the writer should be 
very cautious about risking that profit. 
A SERIOUS BUT ALL-TOO-COMMON MISTAKE 
When an investor is overly intent on keeping his stock from being called away (per­
haps he is writing calls against stock that he really has no intention of selling), then 
he will normally roll up and/or forward to a more distant expiration month whenev­
er the stock rises to the strike of the written call. Most of these rolls incur a debit. If 
the stock is particularly strong, or if there is a strong bull market, these rolls for deb­
its begin to weigh heavily on the psychology of the covered writer. Eventually, he 
wears down emotionally and makes a mistake. He typically takes one of two roads: 
(1) He buys back all of the calls for a (large) debit, leaving the entire stock holding 
exposed to downside movements after it has risen dramatically in price and after he