I’ve been trading for some time now, but I often hear about rolling positions. I don’t fully grasp what that means or when it is typically used.
I’ve noticed discussions about rolling options right before expiration. It seems useful, but I need clarity on how it actually works.
I would appreciate understanding the basics and when it makes sense to roll a position.
Think of rolling as giving your trade another chance when time is running out. You pay extra premium to move to a longer expiration date.
Most people roll when their option is close to expiring but the underlying asset just needs more time to move in their favor.
Be careful though because rolling costs money and sometimes it’s better to just take the loss. The market doesn’t always cooperate even with extra time.
Roll when you need more time but still believe in your trade direction.
Rolling = closing current option + opening new one with later expiry. Used when:
• Time decay hurting position
• Need more duration for thesis
• Avoid assignment risk
Costs premium but extends trade life.
Rolling works well if you believe your trade direction is still valid but need more time. It’s also a way to avoid assignment risk on short options. However, be cautious. If your original trade idea no longer holds up, rolling can lead to bigger losses. I’ve seen traders keep rolling losing positions and end up with large losses. Always evaluate if you would take that trade at current prices. If not, it might be better to accept the loss and move forward.
Rolling saved me from a disaster two months back when my Apple call was about to expire worthless.
Basically you close your current position and open a new one with a later expiration date. Sometimes you change the strike price too.
I rolled my Apple position out by another week and managed to break even instead of losing everything. The extra time let the stock recover.