The Options Playbook

Featuring 40 options strategies for bulls, bears, rookies, all-stars and everyone in between Ally Invest

An Introduction to Rolling

Roll Your Short Options in Style

Rolling is one of the most common ways to adjust an option position. It’s possible to roll either a long or short option position, but here we'll focus on the short side.

When you decide to roll, you’ve changed your outlook on the underlying stock and fear that your short options are going to be assigned. The objective is to put off assignment, or even avoid it altogether. It’s an advanced technique, and it’s one you need to thoroughly understand before executing.

When you roll a short position, you’re buying to close an existing position and selling to open a new one. You’re tweaking the strike prices on your options, and / or “rolling” the expiration further out in time. But rolling is never guaranteed to work. In fact, you might end up compounding your losses. So exercise caution and don’t get greedy.

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

There’s a little more options lingo in this section than elsewhere on the site. It’s safe to assume if you don’t thoroughly understand the terminology, you should learn more about options before attempting this maneuver.