Introduction to Rolling Options

It is important for option traders know when you should rolling options. Perhaps you’ve found yourself in the following situation: its expiration day, your stock is trading right around the strike price of your short call and you are concerned about being assigned. You could wait until the market closes. Just to see where the stock closes and you will either be assigned or the call will expire worthless.

Alternatively, you could buy back the call and close out the obligation. Or you could roll out the call to a different expiration and/or strike price before the market close. Not sure what rolling an option contract means? In this article we will cover the basics of options rolling and walk through a couple of examples which should help you understand this basic options strategy.

 

When do you roll options

You roll options when you run out of time or if the position does not work out the way you thought. Thisis when the underlying moved too much in the opposite direction. If you want to keep the dream alive you start rolling options.

Rolling is one of the most common ways to adjust an option position. It’s possible to roll both as well a long as a short option position. We will we’ll focus on the short posions.

When fear that your short options are going to be assigned, you can decide to roll. another reason is if  you’ve changed your outlook on the underlying stock and. The objective is to avoid assignment.

When you roll a short position, you’re buy close an existing position by buying back the option and seliing another one with a different strike or rolling the expiration further out in time. You want to do this roll for a credit

To help you grasp the concept of rolling, we’ll discuss the process of rolling three basic positions: a short put, and a short call spread. This is just an introduction to how rolling works, so the examples are somewhat simplified.

The art of selling options is to manage early. That means that you take your profit early or you roll your trade around 20 days to expiration.