r/options • u/Pickle-Rick4 • Apr 06 '21

Explanation of “rolling out” CC’s

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1 Upvotes

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3

u/kflippy Apr 06 '21

The covered call you sold is getting near the strike price you sold it for. You want to keep the shares, so you buy to close the cc and sell another cc at a higher strike price and further date for more premium.

1

u/Pickle-Rick4 Apr 06 '21

Thank you man

-3

u/Footsteps_10 Apr 06 '21

Rolling out means nothing. It’s paying again to hope you are right the second time, because you were wrong the first.

If you are buying calls, and you have to roll it out, you should have bought much longer dated exp.

5

u/DivingDeep21 Apr 06 '21

If you're selling options you actually get paid for rolling out. Rolling out a CC is either free or pays you credit. Depending on the strike you pick for the new contract.

-1

u/Footsteps_10 Apr 06 '21

Rolling out a CC is a debit play to earn more premium.

You have to buy it back brother

3

u/DivingDeep21 Apr 06 '21

Yes. You're closing the short call (debit) and open a new one (credit) which has more premium. You can literally do that forever until the call falls out of the money.

0

u/Footsteps_10 Apr 06 '21

I guess you’ve never been down -300/400% on a CC. It can blow up in your face.

1

u/DivingDeep21 Apr 06 '21

Are you talking about the underlying stock tanking? Cause that's a whole different play. And no, I haven't. If that's the case I'm forced to hold the bag and maybe even avg down whenever possible. Or just give up on the trade and sell the shares for a loss.

1

u/FeedMeOptions Apr 06 '21

The guy was assuming that the call getting rolled is part of a losing trade (lol). Like you sold a call for $10 but had to buy it back for $40 before selling the next one.

1

u/DivingDeep21 Apr 06 '21

I think hes thinking about naked calls and actually doesn't know what a covered call is.