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How to Roll Options to Repair Losing Trades

The advantages of selling options include receiving an income upfront and also the opportunity to roll options to change strike prices and expiration dates. Rolling allows us to use future time value to offset past losses, and lets us wait for the trade to be profitable with an extended expiration.

Today we share a few ways to roll options, and how to repair our favourite options strategies.

What Is Rolling Options?

Rolling options is a way to adjust the strike price or extended the expiration of existing Call or Put options. The practice involves closing an existing trade and opening a new trade at the same time.

Why Roll Options?

We expect a few outcomes when an options contract expires:

When an options trade is losing, not only does the trader have psychological pressure to the loss, but there is also a time pressure to the contract expiration.

Here are a few common ways to rolling options:

  • Roll up to move the strike price upwards and lock in existing profits.
  • Roll down to move the strike price downwards and lock in profits.
  • Roll forward to extend the expiration dates and give us more time to wait for the trade to become profitable.

As long as our expectation toward the trade remains unchanged, we can lock in profits or delay the expiration through rolling options.

What Is Roll Up Options?

Roll up options is the practice to move the strike price up. It is commonly used to lock in profits of a short Put after the stock price goes up.

While NVDA currently has a market price of $165, the Dividend & Growth Stock Screener shows NVDA has a Fair Value of $198. We can sell a Put option at $145 that expires in 2 months to anticipate a bullish outlook.

NVDA short put gains
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Short Put becomes profitable when NVDA rises.

If NVDA stock price goes up as expected, the short Put contract depreciates in value so it becomes profitable for us.

We can roll up the Put option:

  • Buy to close the $145 Put to lock in profits. and sell to open a new Put at $155.
  • Sell to open a new Put at $155.
roll up NVDA put
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Roll up the NVDA Put option.

After rolling up, we are left with a short Put at the higher strike price of $155 with the same expiration as before.

nvda higher strike price short put
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NVDA short Put at a higher strike price.

If NVDA continues to rise, the new short Put will profit as well.

What Is Roll Down Options?

Roll down options is the practice to move the strike price down. It is commonly used to lock in profits of a short Call after the stock price goes down.

While GOOGL currently has a market price of $105, we can sell a Call option at $115 that expires in 2 months to anticipate a bearish outlook.

googl short call gains
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Short Call becomes profitable when GOOGL falls.

If GOOGL stock price goes down as expected, the short Call contract depreciates in value to become profitable for us.

We can roll down the options:

  • Buy to close the $115 Call to lock in profits.
  • Sell to open a new Call at $105.
roll down googl call
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Roll down the GOOGL Call option.

After rolling down, we are left with a short Call at the lower strike price of $105 with the same expiration as before.

googl lower strike price short call
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GOOGL short Call at a lower strike price.

If GOOGL continues to fall, the new short Call will profit as well.

What Is Roll Forward Options?

Roll forward options is the practice to delay the expiration of the options contract. It is commonly used to repair a losing trade by giving the options more time to become profitable in the future. We can consider rolling forward if our assumptions toward a stock price trend remain unchanged.

The NKE market price is $108 right now, while fundamental analysis tells us NKE's Fair Value is worth $134. So we can sell a short Put at $100 that expires next month to anticipate the uptrend.

nke short put loses
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Short Put loses when NKE falls.

If NKE stock price falls the short Put becomes a losing trade. While our bullish outlook for NKE remains the same, we can roll forward the option:

  • Buy to close the existing Put.
  • Sell to open a new Put that expires in 2 months.
roll forward nke put
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Roll forward the NKE Put option.

So a short Put that expires in 2 months remains after rolling forward.

nke 2 month expiration put
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An NKE short Put with a longer expiration date.

This allows us more time to wait for NKE to rise and profit from the new trade.

Let's look at the ways to rolling our favourite options strategies.

How to Roll Bull Put Credit Spreads?

A short Put Credit Spread receives a premium, and it will be profitable if the stock price does not fall before expiration. Even if the stock price goes down, the maximum loss is limited.

If the stock price is down with less than 14 days to expiration, we can roll the losing Bull Put Credit Spread to next month and wait for the stock price to rise in the future.

If SHOP's Bull Put Credit Spread is losing due to a drop in stock price while we maintain a bullish outlook, we can roll the contract forward.

shopify put spread loss
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Stock price falls causing the Bull Put Spread to lose.

Close the current Put Credit Spread and sell to open a new Put Spread to roll the trade to next month.

roll shopify put spread
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Close the current Put Credit Spread and sell to open a new Put Spread to roll the trade to next month.

We can consider widening the Put Spread to increase the premium received to offset our existing losses.

shopify put spread next month
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A longer date Bull Put Credit Spread that uses a longer time value and wider strike prices to offset the loss.

As a result, we create a longer date Bull Put Credit Spread with additional credit from longer time value and wider strike prices. Then we can wait for the SHOP stock price to bounce back in a bullish manner and profit from the new trade.

How to Roll Bear Call Credit Spreads?

A short Call Credit Spread receives a premium, and it will be profitable if the stock price does not rise before expiration. Even if the stock price goes up, the maximum loss is limited.

If the stock price is up with less than 14 days to expiration, we can roll the losing Call Credit Spread to next month and wait for the stock price to fall in the future.

If NFLX's Bear Call Credit Spread is losing due to a rise in stock price while we maintain a bearish outlook, we can roll the contract forward.

netflix call spread loss
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Stock price rises causing the Bear Call Spread to lose.

Close the current Call Credit Spread and sell to open a Call Spread to roll the trade to next month.

roll netflix call spread
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Close the current Call Credit Spread and sell to open a Call Spread that expires next month.

We can consider widening the Call strike prices to increase the premium received to offset our existing losses.

netflix call spread next month
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A longer date Bear Call Credit Spread that uses a longer time value and wider strike prices to offset the loss.

As a result, we create a longer date Bear Call Spread with additional credit from longer time value and wider strike prices. Then we can wait for the NFLX stock price to fall back to a bearish trend and profit from the new trade.

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How to Roll Short Strangles?

A Strangle is the combination of a short Put and a short Call to create a neutral strategy. The trade is profitable if the stock price doesn't change very much.

Let's look at how to adjust the Strangle options.

Roll Up Put After the Stock Price Goes Up

If the stock price goes up before the Strangle expires, we can roll up the profitable short Put option to pocket the profit.

In the TSM Strangle example, when the TSMC stock price goes up, our short Put becomes profitable due to a lower delta. While the short Call on the other side loses because of an increase in delta.

tsm goes up
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If the stock price goes up, the short Put profits while the short Call loses.

We can roll up the Put option to collect some profit first:

  • Buy to close the Put option.
  • Sell to open another Put option that expires at the same time at a higher strike price.
roll up put
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Roll up Put option.

After rolling up, we create a Strangle with a smaller profitable width, allowing us to continue to benefit from theta decay.

strangle after roll up
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Roll up to get a narrower Strangle.

If the stock price continues to rise, we create a Straddle after rolling up the Put a few times.

straddle after roll up
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Roll up Put a few times to get a Straddle at a higher strike price.

Then the profitable range would be defined by the premium received. We can close the trade for profit if the stock price remains within the range before expiration.

Roll Down Call After the Stock Price Goes Down

If the stock price goes down before the Strangle expires, we can roll down the profitable short Call option to pocket the profit.

If the TSMC stock price goes down, our short Call becomes profitable due to a lower delta. While the short Put on the other side loses because of an increase in delta.

tsm goes down
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If the stock price goes down, the short Put loses while the short Call profits.

We can roll down the short Call to collect our profit:

  • Buy to close the Call option.
  • Sell to open another short Call that expires at the same time at a lower strike price.
roll down call
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Roll down Call option.

After rolling down, we have a Strangle with a smaller profitable range, allowing us to continue to benefit from theta decay.

strangle after roll down
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Roll down to get a narrower Strangle.

If the stock price continues to fall, we create a Straddle after rolling down the short Call a few times.

straddle after roll down
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Roll down Call a few times to get a Straddle at a lower strike price.

Then the profitable range would be defined by the premium received. We can close the trade for profit if the stock price remains within the range before expiration.

Roll Forward the Straddle Just Before Expiration

If the Straddle is unprofitable less than 14 days to expiration, we can roll the Straddle to a later date.

We can see a TSM Straddle near expiration is running out of time value.

straddle near expiration
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A Straddle near expiration has low time value.

If we believe the stock price can revert back within the profitable range, we can roll the Straddle forward to a later expiration, and use the extra premium to offset previous losses:

  • Buy to close the current Put and Call options.
  • Sell to open future Put and Call options.
roll straddle
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Roll the Straddle to a later expiration.

It would result in a Straddle with a longer expiration, letting us create a wider profitable range with the additional premium received. Then we can wait for the TSM stock price to revert back within our expectation and profit from the time value decay.

far date straddle
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A Straddle that expires later after rolling.

How to Roll Iron Condors?

Iron Condor is a neutral options strategy. We can be profitable when the stock price doesn't move.

We can roll a losing Iron Condor to a later expiration date to increase our chances to profit.

Roll Up Put Vertical Spread After the Stock Price Goes Up

If the stock price goes up before the Iron Condor expires, we can roll up the profitable Put Spread to pocket the profit.

put spread profit call spread loss
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Put Spread becomes profitable due to a lower delta. Call Spread loses because of an increase in delta.

In the PLTR example, when the Palantir stock price goes up, our Put Spread becomes profitable due to a lower delta. While the Call Spread on the other side loses because of an increase in delta.

We can roll up the Put Spread to collect some profit first:

  • Buy to close the Put Spread.
  • Sell to open another Put Spread that expires at the same time at a higher strike price.
roll up put spread
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Roll up the Put Spread to collect some profit, then sell to open another Put Spread at a higher strike price.

After rolling up, we create an Iron Condor with a smaller profitable width, allowing us to continue to benefit from theta decay.

iron condor after roll up
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Roll up to create a narrower Iron Condor.

Roll Forward Call Vertical Spread Just Before Expiration

If the stock price remains high at less than 14 days to expiration, we can turn the Iron Condor into a Call Spread and consider rolling it to a later date.

put spread profit at 11 dte
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The Put Spread is already very profitable by the time the options are near expiration. We can buy to close the Put Spread to collect our profits.

So we are left with a Call Spread. If we have a bearish outlook for PLTR, that the stock price will drop below the Call strike, we can roll the Call Spread forward to a later expiration:

  • Buy to close the current Call Spread.
  • Sell to open a Call Spread that expires later.
roll forward bear call spread
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Roll forward the Call Spread.

It would result in a Call Spread with a longer expiration, letting us compensate the loss with the time value of the new trade. So we can wait for PLTR's stock price to fall back within our expectations and profit from the decay of time value.

bear call spread expires next month
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Roll the expiration of Call Spread to wait for the stock price to fall.

Roll Down Call Vertical Spread After the Stock Price Goes Down

If the stock price goes down before the Iron Condor expires, we can roll down the profitable Call Spread to pocket the profit.

If the Palantir stock price goes down, our Call Spread becomes profitable due to a lower delta. While the Put Spread on the other side loses because of an increase in delta.

call spread profit put spread loss
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Call Spread becomes profitable due to a lower delta. Put Spread loses because of an increase in delta.

We can roll down the Call Spread to collect our profit:

  • Buy to close the Call Spread.
  • Sell to open another Call Spread that expires at the same time at a lower strike price.
roll down call spread
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Roll down the Call Spread to collect our profit, and sell to open another Call Spread at a lower strike price.

After rolling down, we have an Iron Condor with a smaller profitable width, allowing us to continue to benefit from theta decay.

iron condor after roll down
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Roll down to create a narrower Iron Condor.

Roll Forward Put Vertical Spread Just Before Expiration

If the stock price remains low at less than 14 days to expiration, we can turn the Iron Condor into a Put Spread and consider rolling it to a later date.

call spread profit at 11 dte
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The Call Spread is already very profitable by the time the options are near expiration. We can buy to close the Call Spread to collect our profits.

Then we are left with a Put Spread. If we remain bullish about PLTR, that the stock price will increase past the Put strike, we can roll the Put Spread forward to a later expiration:

  • Buy to close the current Put Spread.
  • Sell to open a Put Spread that expires later.
roll forward bull put spread
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Roll forward the Put Spread.

It would result in a Put Spread with a longer expiration, letting us offset the loss with the time value of the new trade. So we can wait for PLTR's stock price to bounce back and profit from the decay of time value.

bull put spread expires next month
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Roll the expiration of Put Spread to wait for the stock price to rise.

We don't need to panic when our options trades lose before expiration. We can roll to change the strike prices or delay the expiration dates to wait for the stock price to move according to our expectations and profit from the new trades.

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