What if you could win 90% of the stock options trades that you place.
YES, 90%!!! I’m not kidding!!
Now if you are thinking that what I mean by this is that you are just going to put on the option trades and then just wait for the money to come rolling in then……
“You got another thing coming!!”
When selling stock options, we can pick our win rate when we select our strike prices. However, every option trade is still obviously not going to go our way.
When trades don’t go our way, we can roll out in time and keep the dream alive while collecting more premium at the same time.
In this video, I’m going to show you:
- What Does It Mean To Roll Stock Options
- Why Is It Beneficial To Roll Stock Options?
- When To Roll Stock Options
- How To Roll Stock Options (Showing 3 real examples on the option trading platform)
——————————————————————–
Hey guys, Darren here. We have a video for you here today.
I think it’s important that we understand all the different strategies and ways that the rich are getting richer. So that we can have the tools to do the same and do better for ourselves but while doing it safely.
We want to be able to do it in any market and have different tools and strategies for different situations.
Option trade management is a subject that many traders have different opinions on and they utilize different strategies.
Rolling stock options allows you more time to profit and collect additional premium.
I promise that we will dig into many different detailed option trading tips and tricks, and dive much deeper into options in future videos.
So go ahead and hit that like and make sure you hit the subscribe button as well if you want to learn to be a consistent and highly profitable option trader.
————————————————————
And also be sure to download the FREE options Workshop in the link below.
It talks about the two main benefits of trading options over buying stocks.
DISCLAIMER, I am not a financial planner and I am not recommending trades. Please do your own research and if you are new or learning options, I recommend you start small.
—————————————-
What Does It Mean To Roll Stock Options?
Rolling stock options is just another way of saying closing out an option position in one month and opening another one using the same strategy in an option cycle further out in time.
Why Is It Beneficial To Roll Stock Options?
The main reason to roll options is to take a losing position and allow more time to profit and collect additional option premium.
So the benefit is to turn a losing trade into a winning trade. And to make money instead of lose money.
Not every option trade is going to be profitable right off the bat. However, if we roll out in time we can turn trades that are unprofitable into winners. Normally with just 1-2 rolls out in time.
When we have winners that are trending higher we can also roll up and out to greatly increase profits.
When To Roll Stock Options
There are different thoughts on exactly when the best time to roll options is. Some people like to wait and roll trades at the last minute just prior to expiration.
Others like the Tastytrade guys have done a lot of research. They like to open trades (or put them on) at around 45 DTE and then roll at 21 DTE. Their research shows that this smooths out the portfolios overall P&L over time and avoids huge swings up and down. In other words, it reduces risk.
I think that everyone who trades options should track their trades and then find out what works for them. If you don’t track your trades it will be difficult to know what is working and what is not working for you.
I normally like to place trades at 30-45 DTE. For me, I personally have found that I like to roll my undefined option trades at around 10-15 DTE. The guys at Tastytrade have done a lot of studies that have proven its best to roll at 21 DTE. This is for naked puts, calls, and strangles for the most part.
I sometimes wait a little longer to roll defined risk trades. Trades like Iron Condors and Put and Call credit spreads. This is because they are “defined risk” so there is a stop already built in that limits the risk and max loss. If I am already at max loss then it is a free shot. I might as well leave it on to see if the stock price comes back and we can pin the profit zone.
I also trade SPX 0 DTE options and that is a completely different strategy. I’ll wait until the end of the day and then roll out in time for a profit. By doing this I can adjust the strikes and collect a credit. I did a video on this 0 DTE SPX strategy and I’ll link to it below so be sure and check that one out.
How To Roll Stock Options (Showing a real example on the option trading platform)
Alright, we are going to take a look at how to roll options to collect additional monthly premium.
Now don’t worry we are going to go through everything in detail.
Let’s start by going to the Tastytrade platform. Tastytrade is one of the best brokerages for trading options. It’s the one that I have used for years and they are the guys that developed TOS the Think or Swim platform and sold it to TD Ameritrade which is now Shwab and the one they still use.
Tastytrade is even better. Right now you can get cash back when you open an account. I’ll put a link down below and if you fund with at least two thousand dollars the channel gets a small fee that really helps us out and is much appreciated. You really need to have a couple thousand at least anyway so that you can place a few different trades.
I’ll open my Tastytrade account and look at a few current trades and the possibility of rolling them.
The first one that we will look at is a strangle in AI. A strangle is an undefined risk trade. So typically I like to roll these at around 15 DTE.
We put this trade on and collected $219. At 21 DTE you can see that we are up $59 if we were to close out now. We have $160 that is still left to be gained or banked in the next 21 Days.
The stock price is currently $36.42 so it is right in the middle between the 30 short put strike and 44 short call strikes.
I like to look at the chart and see the range that AI has been trading within. So I want to stay in that range moving forward.
AI is poised to do well moving forward so I am going to roll to the 30 – 45 strangle moving forward.
So we close the current front month Vertical and open a new vertical at 49 DTE in the August regular options.
We collect another $252 for making this roll.
Example of Defined Risk Option Roll
Now let’s look at another defined risk roll.
We placed a 440 – 445 Call Credit spread in NVDA and collected $163.
We currently are up $20 or in other words if we closed out today, we would keep $20 of the $163 we collected when we sold the Call credit spread. This is because it would cost $143 to close the trade.
We could roll out now to the next August monthly option cycle.
However, if we do this now with 21 DTE we would only collect another $34.
The current price of NVDA is $423 and it is still trading at all time highs. This is the reason that I placed the call credit spread in the first place.
In this case, since we have a defined risk spread on, I am okay with waiting longer.
We still have $143 left in the current option cycle and we are protected with the long call that we bought when we placed the spread trade. So I am okay with waiting further.
That $143 will turn to profit and the cost to close the spread will continue to come down as each day passes on the march down from 21 days to expiration.
That is as long as the stock price stays below the $440 short strike price.
So in this case, I am going to wait and see if the stock price moves over the next 21 days. As long as it is still well below the $440 short strike, I will continue to hold off on rolling.
If the stock price rises, then I can always roll at that time to the next option cycle and collect additional premium.
I’ll take my chances since NVDA is highly volatile and it is at all time highs. I need to have some trades on that are delta negative or short anyway so that I can take some profits on the next coming down days.
Now let’s look at a trade that is currently losing.
I actually have a couple of QQQ Call verticals on here. They are both currently losing. But let’s just concentrate on the 367 – 372 Call Vertical.
You can see here that if we close the 367-372 Call vertical in July that was losing and we opened the same Call vertical in August. We collected another $16 in premium and bought ourselves additional time for the stock price to come back down in our favor and into the profit zone.
Over time we know the stock market moves up and down so there is a very good chance at some point this trade will be profitable. If it doesn’t happen this month we rinse and repeat and do it again in the next month and collect more premium.
For the last example let’s take a look at META.
We can take a look at the 1 year chart and see that it is at a 12 month high.
We currently have on a 315-325 Call Vertical spread that we sold (so we collected premium).
However with just 6 DTE we are down $77 in the position. Since I am still below my 315 short strike and META has already had a big run up, I am going to hold and see how it moves next week. If it does continue up and test my short strike then Ill right click on the Tastytrade platform to roll.
By right clicking on the two options and highlighting them you will see the different weekly expiration dates that pop up and you can roll to collect additional premium.
We will click on the 8/18 regular option chain with 34 DTE.
It then automatically takes you to this trade page and populates the trade.
Now this closes the 315-325 Vertical and opens a new one at that 34 DTE option cycle.
You can see we collect another $186 in premium and more time for the stock to hopefully move down and come back to planet earth.
Option Trading Takeaways
Rolling stock options just means closing out an option position in one month and opening another further out in time
We can turn losing trades into winners by allowing more time to profit and collect additional option premium
We can look to start rolling trades at 10-21 DTE
Trades that are still OTM out of the money and within the profit zone can be held longer and rolled once the stock price becomes closer to being in the money
Alright guys, if you are a beginner and this sounded confusing do not worry. It did for me as well originally. We will be continuing to cover the details in future videos. We will continue to learn and succeed together.
I’ve put a link down below for the FREE Options Workshop. Be sure to grab that.
Remember to hit like and subscribe and leave a comment below with your thoughts on the video and what you are trading today and why.
Thanks for watching please share this video with a friend and see you in the next one!