Online Trading Options Strategies - Rolling

Rolling is defined in options online trading as moving a position from one strike to another either vertically in the same month, horizontally to another month or some combination thereof.

Other times, you may have to buy your short call back so that you will not lose your stock. Sometimes, you may even want to allow the stock to be called away if you have decided that the stock has reached a level were you want to take your profits and begin to look for another opportunity.

The term roll means to move your position either out to the next strike or to move your position up or down a strike in the same month. The term roll means to move.

Rolling is normally done via time spread and/or vertical spreads. Without getting into the trading of spreads, which is a unique strategy in itself and a topic for future Options University courses, we will talk a little about the roll.

As stated before, the covered call strategy is most effective when executed month in and month out over an extended period of time.

In order to do this, an online trading investor must re-initiate the position every month at the option's expiration. The re-initiation of the position every month is where the term rolling comes from. However, there may be times when you may want to give yourself a little more upside room for capital appreciation. In those rare cases, you will not want to roll the position, because it might be called away if the call you sold is exercised when it becomes in the money.

When an option's expiration approaches, your short option can either be in-the-money or out-of-the-money. As we discuss the two potential outcomes, let's first assume that we want to hold onto our stock.

If the option is going to finish out of the money, you would let it expire worthless and then sell the next month's call. If the option is going to expire in-the-money and you want to keep the stock you will need to buy the short option back and sell the next month's call.

This trade will consist of two online trading options. You will be buying one option and selling another, which is commonly known as a spread and is referred to as a single trade.

So, when you roll out your covered call or buy-write, you do it by doing a spread. The front month option, the one that you happen to be short, will be bought back thus ensuring you keep your stock.

The second month option will be sold short thus re-initiating your covered call strategy. The position that remains is long stock and short calls. As far as the selection process of the spread used for the rolling of the position, there will be some choices.

Of course, there is no choice as to the front month option, you must buy back the option you are short. However, you do have a choice as to the next month option you are going to sell, whether it be near term or farther out in expiration.

This goes back to our earlier conversation about lean. If you are no longer bullish then you would not have bought back your short call and instead allowed it to be exercised and have the stock called away from you. If you choose to roll the position then you must be somewhat bullish on the online trading stock. Your lean will dictate to you which new option to sell.

-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
If You Would Like to Learn More About Online Trading
Then Discover How to Protect Your Investments
With the Leveraged Power of options & Learn How
to Trade options Like the Pros..

Click Here --> http://www.options-university.org
-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-

---

Bearish or Bullish?

If you are interested in stock investing and the stock... Read More

How to Buy to Let

Find out everything you need to know about buy to... Read More

Discover the Foundation of Retiring Wealthy - The IRA!

Let me tell you about some legal ways to avoid... Read More

DXPortfolio: A Great Passive Investment of 25% to $40% per month

First, I need to explain about e-currencies or digital currencies.... Read More

Choosing A Financial Advisor

With so many financial advisors trying to woo you with... Read More

Investing for Retirement - Not an All or Nothing Play

In 1519, Hernando Cortes, beached on the shores of unexplored... Read More

Numismatics are for Collectors, Not Investors

As a precious metals investor, you may heard much about... Read More

Building The Foundation For Wealth

You wouldn't build your home on anything less than a... Read More

Chile Leads the Latin Pack

Everyone's talking about China. Don't miss the opportunities in the... Read More

Retirement or Financial Freedom?

In the past most people never retired. They died. The... Read More

Inflation Proof Your Investment Portfolio with ETF?s

Even though inflation has been relatively quiet in the U.S.... Read More

Easily Finding A Good Stock

There is a tremendous amount of software, complicated high priced... Read More

How Do I Start Investing Online and What Are Some Basic Tips?

If you are new to investing online, don't put your... Read More

Asset Location ? Increase Investing Returns & Reduce Your Taxes

Location ? Once the holy grail only for real estate... Read More

Margin Benefits are Marginal at Best

Margin is one of those things that novices find puzzling... Read More

Mutual Fund Returns May Not Be As They Seem!

Arthur Levitt, during his tenure at the SEC, experienced many... Read More

Trading Systems

A trading system consists of a set of rules for... Read More

The Dreaded Direct Question

(Please have a glass of water within reach before reading... Read More

Maniac Investment

Let's first understand what maniac means. According to Webster a... Read More

Can Using Sales Leaseback Method of Investment Property Acquisition Reduce Risk?

Sales Leaseback compared to traditional property investmentCan a Sales Leaseback... Read More

When Its Too Late to Save for Retirement

You are 55 years old (or somewhere around there) and... Read More

Need To Trade!

You don't HAVE to be trading.As a novice trader, you'll... Read More

Investing As A Sport?

I said last week that money doesn't generally buy happiness,... Read More

Tyranosaurus Rex

Everyone knows T Rex was the most fearsome of all... Read More

How To Start Investing For Financial Independence, Part 1

Today, I am going to start a multi-part series about... Read More

It Is Never Too Early To Start A Roth IRA!

The Roth is kind of weird until you get used... Read More

In a Time of Need

As I take my leisurely walk with my dog through... Read More

A Safe Port For Mutual Funds But Not You!

Soft dollars, a form of legal kickback, is a sly... Read More

Hedge Fund 101 - Make Money with Hedge Funds

Investors are always looking for the best investments that will... Read More

Understanding The Real Rate of Return!

There is one indicator more than any other which determines... Read More

Realistic Investing Expectations

Over the long term stocks have provided us with great... Read More

The Three Legged Stool

My paternal grandparents were born near Lake Como, Italy. My... Read More

Diversify!

The best way to avoid being hit hard by a... Read More