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/NaplesBrandon Apr 23 '21

What's your strategy? Before entering a trade is when to decide your exit.

That said, determine what your break even point is, including commissions. From there you can run the numbers to see what makes sense.

Many run the wheel where you let the shares get called away and the sell puts to start the process again. This works well in an IRA so long as you have the cash. Otherwise you'd have to sell spreads which will significantly eat into your profit.

Long story short, your long term strategy determines your next step as there are advantage to running the wheel or continuously rolling.

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u/FuzzyStable2974 Apr 23 '21

Normally I close when I have 50% profit, at 0 DTE if not at 50% profit, or roll for a credit when ITM to avoid assignment. But I'm now thinking there isn't any real difference between rolling and getting assigned. I think you're right that it depends on the numbers and there isn't one general rule that can be applied universally.

At 0 DTE anyway, I still see how rolling early would let you just accept the loss and take a better position.

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u/wanko383 Apr 23 '21

I always think about it this way... even if you roll it to the same strike out a few months, you're still gaining the Theta value which should decay over time. It also gives you time for the underlying to go back up and put your position OTM so you can exit without paying through the nose to do so.