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Rolling Options: How to Extend a Trade and Collect More Premium

Options trading Course
Rolling an option is a powerful strategy that allows traders to extend the duration of a position, adjust strike prices, or respond to changing market conditions—all while continuing to collect premium. This approach is especially useful for traders who sell cash-secured puts or covered calls as part of an income-generating options strategy.

What Does It Mean to “Roll” an Option?

To roll an option, a trader closes an existing position and opens a new one—usually with a different expiration date and sometimes a different strike price. This is often done simultaneously as a single transaction, known as a rolling order.

For example, if a trader has sold a put that is close to expiring and still out-of-the-money (meaning the strike price is below the current market price), they may choose to buy back that option and sell a new one with a later expiration. This allows them to collect additional premium while maintaining a similar risk profile.

When and Why Traders Roll Options

Rolling is typically used in one of two scenarios:
To extend a successful trade: If a sold put is on track to expire worthless, the trader can roll the position forward to a later date, continuing to earn premium without being assigned shares.
To manage a losing trade: If the underlying asset has moved against the position, the trader may choose to roll the option to a lower strike or a later date to reduce potential losses or avoid assignment.

A Real Example: Rolling a Cash-Secured Put

Consider a trader who sold a cash-secured put on the SMH ETF (which tracks the semiconductor sector). Suppose they sold the 195 strike put and collected $1.27 per share in premium, and the option is nearing expiration with the ETF still trading above $195.

Instead of letting the option expire, the trader may choose to:

1. Buy to close the original 195 strike put.
2. Sell to open a new 195 strike put expiring 30 days later.
3. Collect a new premium (for example, $3.15 per share).

In this case, the trader collected a total premium of $1,575 across five contracts (each contract represents 100 shares). This extended their exposure for another month while locking in additional income.
How to roll options: SMH ETF example

Rolling Mechanics

Here’s how a rolling trade generally works:
Buy to Close (BTC): You close the original option position.
Sell to Open (STO): You open a new option with your desired strike and expiration.
Net Premium: The difference between the premium paid to close and the premium received from the new sale determines your net credit or debit.
Many modern trading platforms offer a "roll option" feature that combines these actions into one simple order.

Key Benefits of Rolling

Collect more premium

Extending time to expiration generally increases the value of an option.

Adjust risk

Traders can roll up, down, or out depending on market conditions.

stay active

Rolling helps traders stay engaged with trades without accepting assignment if they’re not ready to own the underlying shares.

Things to Keep in Mind

Assignment Risk: Rolling doesn’t guarantee avoidance of assignment, especially if done close to expiration or with deep in-the-money options.
Trading Fees: Make sure to consider any commissions or fees involved in rolling, especially if doing so frequently.
Time Decay (Theta): Rolling extends exposure to time decay, which is generally beneficial for option sellers.

Key Takeaways

Rolling an option lets you extend a trade by closing your current position and opening a new one with a later expiration.
You can roll both puts and calls to collect additional premium or manage risk.
Rolling is often used to avoid assignment on options that are near expiration.
More time until expiration usually means more premium, which can boost potential returns.
Rolling is best done on assets you’re comfortable owning if assignment happens later.

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Leveraged trading in foreign currency contracts or other off-exchange products on margin carries a high level of risk and is not suitable for everyone. You may lose more than you invest. Price and performance data is provided for informational purposes only and is not investment advice. Past performance is not indicative of future results.

There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
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