Mixing Exposure  •  247
compelling enough, this is the time to figure out a clever way to get more 
exposure to it. 
Y ou can write calls as long as they are at least at the same strike 
price as your previous purchase price or EBP; this just means that you 
are buying at $16 and agreeing to sell at at least $16, in other words. Also 
keep in mind that any dividend payment you receive you can also think 
of as a reduction of your EBP—that cash inflow is offsetting the cost of 
the shares. Factoring in dividends and the (very small) cash inflow as-
sociated with writing far OTM calls will, as long as you are right about 
the valuation, eventually reduce your EBP enough so that you can make 
a profit on the investment.
Over-/Underexposure
Options are transacted in contract sizes of 100 shares. If you hold a number 
of shares that is not evenly divisible by 100, you must decide whether you 
are going to sell the next number down of contracts or the next number 
up. For example, let’s say that you own 250 shares of ABC. Y ou can either 
choose to sell two call contracts (in which case you will not be receiving 
yield on 50 of your shares) or sell three call contracts (in which case you 
will be effectively shorting 50 shares). My preference is to sell fewer con-
tracts controlling fewer shares than I hold, and in fact, your broker may or 
may not insist that you do so as well. If not, it is an unpleasant feeling to get 
a call from a broker saying that you have a margin call on a position that 
you didn’t know you had.
Getting Assigned
If you write covered calls, you live with the risk that you will have to deliver 
your beloved shares to a stranger. Y ou can deliver your shares and use the 
proceeds from that sale (the broker will deposit an amount equal to the 
strike price times the contract multiplier into your account, and you get 
to keep the premium you originally received) to buy the shares again, but 
there is no way around delivering the shares if assigned.