fbpx To Roll Or Not To Roll – That Is The Question! (Preview) | Option Strategist

To Roll Or Not To Roll – That Is The Question! (Preview)

By Lawrence G. McMillan

One of the tougher choices an option trader faces is what to do with a profitable position. That’s a good choice to have, but it might not be an easy one. Our philosophy is always to let profits run. Therefore we use trailing stops, not targets. Targets only take you out of your best positions way before they have run their course. But even within the framework of using trailing stops, there are some choices to be made besides just raising the trailing stop as a long call position gains profits. Specifically, when should a profitable long call be rolled up or a profitable long put be rolled down – if at all?

Example: let’s look at an example. Suppose you bought XYZ Sept 35 calls at a price of 3.00, and now XYZ has made a good run to 41. Assume the 41 strike exists. Here are the current prices:

XYZ: 41 XYZ
Sept 35 call: 7.50
XYZ Sept 41 call: 4.00

To roll up, you would sell your Sept 35 call at 7.50 and buy the Sept 41 call for 4.00, for a credit of 3.50 points, using the prices in this example...

Read the full article, published on 7/30/2021, by subscribing to The Option Strategist Newsletter now. Existing subscribers can access the article here

The Option Strategist Newsletter $29 trial

Share this

Option Strategist
Blog Search

Recent Blog Posts

Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. Leverage can work against you as well as for you. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and investing, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results.
Visit the Disclosure & Policies page for full website disclosures.

-->