Chapter 2: Covered Call Writing 75 
rolling down if the stock drops further, remains unchanged, or even rises slightly. 
Table 2-22 and Figure 2-4 compare the original write with the rolled-down position. 
It is clear from the figure that the rolled-down position is locked into a loss. However, 
the rolled-down position still outperforms the original position unless the stock ral­
lies back above 17 by expiration. Thus, if the stock continues to fall, if it remains 
unchanged, or even if it rallies less than 1 point, the rolled-down position actually 
outperforms the original write. It is for this reason that the writer is taking the most 
logical action by rolling down, even though to do so locks in a loss. 
TABLE 2-22. 
Profits of original write and rolled position. 
Stock Price at Profit from 
Expiration January 20 Write 
10 -$800 
15 - 300 
18 0 
20 + 200 
25 + 200 
FIGURE 2-4. 
Comparison: original write vs. 
11
locked-in loss." 
c: +$200 Original Write 
~ 
t 
«i 
~ 
o -$100 
~ a.. 
15 20 
Stock Price at Expiration 
Profit from 
Rolled Position 
-$600 
- 100 
- 100 
- 100 
- 100