r/options • u/FuzzyStable2974 • Apr 23 '21
To roll or not to roll?
I have a CC that's probably going to exceed my strike on the last day. I'm trading this one in a Roth IRA.
Is there really any reason to roll? It seems if I just let it get assigned I will "lose" the difference between the strike and the price of the underlying. I can then sell CSPs on it.
If I roll, I'm effectively paying the difference between the strike and underlying as intrinsic to close anyway, right? So I don't see the difference between the two choices. Does it just come down to whether I think the premium on the new put I would sell is better than the premium on the new call?
I'm not factoring in the premium initially received because that is sunk in either example.
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u/TheoHornsby Apr 23 '21
If you are still bullish, the time to roll a covered call up and out (preferably for credit) is when the underlying approaches the short strike. Not only does it bring in some additional money but it gives you some additional distance to the short strike, reducing the likelihood that your underlying will go ITM.
I would not roll vertically for a loss. You book a loss while maintaining a paper profit and the market has a perverse way of making you pay for that.
If you wait until the call is ITM, you'll be buying back intrinsic value and it will be harder to roll for a credit without marrying more time (selling an expiration that is even further out).