I am tweaking a covered call algorithm. The short leg consists of out of the money call options. The goal is to collect the tim premium, but an equally favorable circumstance is when the call decreases in value due to the lower price of the underlying asset in the normal course of market fluctuations. The short leg can easily go from a 10% gain to a 60% gain because it shifts further out of the money, at this point the price decrease becomes much slower, as it will take several more standard deviations to take the 60% gain to an 80% gain, this is where I am contemplating closing the short leg in favor of selling the call that is now closer to the money.
Are there any caveats of doing this? My risk profiles do not intuitively show me the caveats of rolling the short leg in the middle of a covered call.
Upon getting the second set of short options (and closing the first set of short options) , they will still be covered by a long leg. If price decreases, the short options approach $0 (100% gain), if price stagnates, the short options approach (100% gain), if price increases I will collect only the time premium from the short options and my maximum gain with the long leg is limited.
Am I missing something? Insight appreciated