78 Part II: Call Option Strategies 
UTILIZING DIFFERENT EXPIRATION SERIES WHEN ROLLING DOWN 
In the examples thus far, the same expiration month has been used whenever rolling­
down action was taken. In actual practice, the writer may often want to use a more 
distant expiration month when rolling down and, in some cases, he may even want to 
use a nearer expiration month. 
The advantage of rolling down into a more distant expiration series is that more 
actual points of protection are received. This is a common action to take when the 
underlying stock has become somewhat worrisome on a technical or fundamental 
basis. However, since rolling down reduces the maximum profit potential - a fact that 
has been demonstrated several times - every roll-down should not be made to a more 
distant expiration series. By utilizing a longer-term call when rolling down, one is 
reducing his maximum profit potential for a longer period of time. Thus, the longer­
term·call should be used only if the writer has grown concerned over the stock's capa­
bility to hold current price levels. The partial roll-down strategy is particularly 
amenable to rolling down to a longer-term call since, by rolling down only part of the 
position, one has already left the door open for profits if the stock should rebound. 
Therefore, he can feel free to avail himself of the maximum protection possible in the 
part of his position that is rolled down. 
The writer who must roll down to lock in a loss, possibly because of circum­
stances beyond his control, such as a sudden fall in the price of the underlying stock, 
may actually want to roll down to a near-term option. This allows him to make back 
the available time premium in the short-term call in the least time possible. 
Example: A writer buys XYZ at 19 and sells a 6-month call for 2 points. Shortly there­
after, however, bad news appears concerning the common stock and XYZ falls quick­
ly to 14. At that time, the following prices exist for the calls with the striking price 15: 
XYZ common, 14: 
near-term call, l; 
middle-term call, 1 ½; and 
far-term call, 2. 
If the writer rolls down into any of these three calls, he will be locking in a loss. 
Therefore, the best strategy may be to roll down into the near-term call, planning to 
capture one point of time premium in 3 months. In this way, he will be beginning to 
work himself out of the loss situation by availing himself of the most potential time 
premium decay in the shortest period of time. When the near-term call expires 
3 months from now, he can reassess the situation to decide if he wants to write