In the example used so far in this portion of the Tutorial, we have based our decisions on the opinion that the Stock's future has a neutral to slightly bullish bias. To illustrate a point, we will change our opinion to short term very bullish, keeping our intermediate view at neutral to slightly bullish due to the following scenario; XYZ has just reported same store sales far exceeding the consensus estimates. The Stock has taken a jump out if the gate today on the news, with the Christmas shopping season fast approaching, you feel that the Stock could have a day or two of moderate increases. So let's consider trying to grab a bit more of that increase than would be possible with the current covered position. So, what if you were to unwrap the open position today, with the intent of rolling up and out after a few days, when you anticipate that the Stock will be at a higher price.
The information in the top portion of the View above will be left as is, while the Stock offer in the lower portion is changed to 32 1/2, the date changed to 12/16/04, and the number of contracts increased back to three. The big decision here is whether or not the increased risk (the Stock could conceivably move against you), of leaving the position naked, is offset by the odds of a Stock price increase resulting in an increase in Call option income. If your hunch is correct, the program calculations confirms that the income generated by the sale of Calls could be substantially higher. With the 'What If?' changes made, the Call bid increased from .95, to 1.14. This resulted in the simple and APR rates of return at neutral changing from 7.0% to 10.5% and 24.3% to 36.3% respectively. The assumptions we have made while evaluating this position are completely subjective, so deciding whether or not to act depends totally on your own conviction regarding these possible movements in the underlying Stock and the resultant change in the Call prices.