84 Part II: Call Option Strategies 
Example: An investor previously entered a covered writing situation in which he 
wrote five January 30 calls against 500 XYZ common. The following prices exist cur­
rently, l month before expiration: 
XYZ common, 29¼; 
January 30 call,¼; and 
April 30 call, 2¼. 
The writer can only make ¼ a point more of time premium on this covered write for 
the time remaining until expiration. It is possible that his money could be put to bet­
ter use by rolling forward to the April 30 call. Commissions for rolling forward must 
be subtracted from the April 30's premium to present a true comparison. 
By remaining in the January 30, the writer could make, at most, $250 for the 30 
days remaining until January expiration. This is a return of $8.33 per day. The com­
missions for rolling forward would be approximately $100, including both the buy­
back and the new sale. Since the current time premium in the April 30 call is $250 
per option, this would mean that the writer would stand to make 5 times $250 less 
the $100 in commissions during the 120-day period until April expiration; $1,150 
divided by 120 days is $9.58 per day. Thus, the per-day return is higher from the April 
30 than from the January 30, after commissions are included. The writer should roll 
forward to the April 30 at this time. 
Rolling forward, since it involves a positive cash flow ( that is, it is a credit trans­
action) simultaneously increases the writer's maximum profit potential and lowers the 
break-even point. In the example above, the credit for rolling forward is 2 points, so 
the break-even point will be lowered by 2 points and the maximum profit potential 
is also increased by the 2-point credit. 
A simple calculator can provide one with the return-per-day calculation neces­
sary to make the decision concerning rolling forward. The preceding analysis is only 
directly applicable to rolling forward at the same striking price. Rolling-up or rolling­
down decisions at expiration, since they involve different striking prices, cannot be 
based solely on the differential returns in time premium values offered by the options 
in question. 
In the earlier discussion concerning rolling up, it was mentioned that at or near 
expiration, one may have no choice but to write the next higher striking price if he 
wants to retain his stock. This does not necessarily involve a debit transaction, how­
ever. If the stock is volatile enough, one might even be able to roll up for even money 
or a slight credit at expiration. Should this occur, it would be a desirable situation and 
should always be taken advantage of.