Rolling Options: How to Roll an Option to Become a More Dynamic Investor

Sometimes you want to gain a little bit more flexibility in your options trading strategy. That's where rolling options come into play. This is a method of adjusting or extending options contracts, helping you manage risk and increase your profit potential while investing in options. This guide will provide a clear introduction on how to roll options and why you may choose to do it.

Key Takeaways

• Rolling options is a way to adjust or extend options contracts to manage risk and maximize profits or reduce losses.
• When rolling an option, you'll aim to extend the expiration date or adjust the strike, depending on your trading strategy and market conditions.
• There are three types of rolling options: rolling a position up (increasing the strike), rolling a position down (decreasing the strike), and rolling a position out (extending the expiration date).

Rolling options is a strategic move that allows you to adjust your trades as the market evolves. It involves closing an existing position and opening a new one—usually with a different strike price, a different expiration date, or both. Rather than exiting a trade completely, rolling gives you the flexibility to adapt your position without walking away from the opportunity.

There are three main ways to roll an option:

• Rolling up: Increase the strike price to lock in gains or follow a bullish trend.
• Rolling down: Lower the strike price to secure profits in a bearish move or improve your stance in a losing trade.
• Rolling out: Extend the expiration date to give your trade more time to play out.

Rolling up comes into play when the market is moving in your favor, particularly in bullish scenarios. Imagine holding a call option with a $50 strike, and the stock rallies to $60. Instead of closing the trade entirely, you might roll up by selling your current call and buying a new one at a higher strike, such as $65 or $70. This locks in part of the gains while keeping your bullish exposure. Even traders managing naked calls use rolling up to reduce pressure when the stock rises more than expected—it's a way to stay in the game without getting burned.

Rolling down is the opposite. You decrease your strike to either lock in profits during a downturn or reposition a trade that’s gone against you. For instance, say you’re holding a long put with a $100 strike, and the stock has dropped to $80. By rolling down to a new $70 strike, you book part of your gains and keep a bearish stance. Rolling down also works when managing naked puts that are under pressure from a sharp decline. In either case, you’re adapting the trade to better reflect current market prices.

Rolling out focuses on time. Maybe your call option is expiring soon, but the stock hasn't quite reached your strike. You still believe the trade has potential—you just need more time. Rolling out means replacing your current option with a new one that has a later expiration, often at the same strike. This is especially common when managing covered calls or naked positions that need more time to work. In many cases, traders also choose to roll out and up or roll out and down simultaneously, adjusting both the time and the strike for a more complete repositioning.

Whether you’re rolling up to chase momentum, rolling down to protect profits, or rolling out to extend your window of opportunity, the core idea is the same: adapt your options strategy to real-time market conditions. By learning how and when to use rolling techniques, you can stay nimble, manage risk more effectively, and give yourself better odds of success in every trade.

Using Rolling Options to Lock In Profits and Handling Losses

Here’s a quick overview of how and why traders roll options in different scenarios:

While this guide focuses on the most common rolling methods, there are many other types of options strategies where rolling may apply.

Why Does an Investor Typically Roll Options? (Rolling Options for Profit Potential and More)

Traders roll options to stay flexible and respond to changing market conditions. By rolling an option—adjusting the strike, the expiration date, or both—you can lock in profits, reduce losses, or simply buy more time for your trade to work.

Let’s say you have a call option with a $50 strike, and the stock jumps to $60. You might use a call roll strategy: sell your current call and roll the call option to a higher strike, like $55. This locks in some gains while staying exposed to further upside.

Alternatively, if the trade hasn’t moved in your favor, you can roll the option out—extend the expiration date—giving the stock more time to reach your target. This works for calls and puts, whether you're managing a long or naked position.

In short, rolling options helps you:

• Lock in profits when trades go well
• Manage risk or recover when trades go sideways
• Stay aligned with your market outlook

When options traders have made a profit or need to adapt to a changing outlook, they often roll their options by adjusting their existing option position and opening a new one with more favorable conditions.

Learning how to roll options effectively—whether you're using a roll call option or roll put option approach—is a powerful tool that can improve your results and give you greater control over every rolling position.

Rolling Covered Calls (and More Advanced Strategies)

A covered call involves holding at least 100 shares of a stock and selling a call option against that position. In other words: the covered call strategy lets you earn income from a short call, typically by collecting a premium received for selling it. It’s a popular move when you’re bullish on the stock long-term but want to generate some short-term income.

Rolling a Covered Call - A Theoretical Example

Just like with long options, you can roll a covered call if market conditions change. For instance, say you sold a call on stock ABC with a $50 strike and the stock has now climbed past that level. To avoid having your shares called away—or simply to extend the trade—you might roll the call option by buying back the current one and selling another call with a longer expiration or higher strike.

This type of rolling position can give you room for more upside while collecting additional premium. Just remember: you're staying exposed to market risk for longer. The stock could drop while you're still holding it, so rolling options in this context should be done with a clear view of your risk tolerance and objectives.

Note that, in the examples above, we have taken a very simple options strategy just to clarify the concept of rolling options. Nothing prevents you from applying the same idea to more advanced trades, such as credit spreads, diagonal spreads for income, and so on.

The Strategy of Rolling Long Calls (Call Roll Strategy)

Now, let's suppose you have a long call option and a couple of factors are making you think about rolling this option (the so-called "call roll strategy", which will lead you to roll a call option). 

Firstly, time decay is becoming a concern when you're thinking whether to roll call options. As the expiration date approaches, your call option remains out of the money (OTM). 

Instead of letting time decay eat away your option's value, rolling the option is an operation that can extend the expiration date. This gives the underlying stock more opportunity to swing in your favor, potentially converting your OTM option into a profitable one.

Secondly, the stock price is teasingly close to your strike but hasn't quite made it. In this scenario, you could roll the call to a lower strike or later expiration, improving your chances of profitability.

 For instance, if your current strike is $50 and the stock price is $48, rolling the option to a lower strike, say $45, could increase the chance of the stock price reaching the new strike, turning the option profitable. 

To illustrate these points, let's look at a practical case with our options screener. In the first screenshot, we have a close-to-expiration call option that is still OTM for Meta Platforms (META). The current strike is $495, and the stock price is $490.22.

By rolling the option, as shown in the second image, we buy a new call option with the same strike expiring one week later. This adjustment gives us a better shot at the stock price, hitting the new strike and the option becoming profitable.

However, rolling the option increases our overall breakeven price. This means that the breakeven price you see in the second image above should actually be incremented by the option premium of the first call. You could also vary the strike without changing the expiration date (or you could do both) to improve your chances of profitability. 

Keep in mind that, if you had originally sold a call instead of buying one, the rolling logic would change accordingly—often aiming to reduce losses or manage risk.

Just note that while rolling options offers flexibility and potential profit, it involves risks: if your rolling is based on a wrong trade idea, you will only increase your losses or reduce your profits.

Rolling Long Puts (The Strategy of Rolling a Put Option)

Having clarified the call roll strategy, it won't be hard to understand how to roll put options. Imagine you're holding a long put option, and a couple of factors are pushing you towards considering rolling options. 

This time, we will look at an in-the-money (ITM) case, to give you another example of how flexible rolling options can be and see how to roll a put option.

First of all, assuming the underlying stock price has moved lower for a couple of weeks, you have already earned quite a profit with your long put position. 

Second, you don’t think that the bearish phase is close to an end, but you would like to cash in the profit you’ve earned so far while still keeping a bearish position. If your current strike is $60 and the stock price is $55, rolling the option to a lower strike, like $50, could let you bring home your profits while benefiting from another bearish movement in the stock price. 

To illustrate, let's examine a practical case just like we did before. Initially, we have a close-to-expiration ITM put option for Boeing (BA). Your current strike is $190, and the stock is still trading at $182.35.

By rolling the option, as shown in the second screenshot, we buy a new put option with a lower strike. 

Note that you may even combine the concepts of “rolling down” and “rolling out” an option here by simply buying a lower-strike put option (let’s say at $170) expiring later than your first contract (for instance, 1 week later). 

This adjustment lets us cash in the profits earned on the first trade while still letting us profit from further price decreases in BA. Here is the option (and its updated P&L profile) you could use to roll down your trade:

Rolling down and out can be a good way to manage risk or recover from a losing position, by closing your original position and opening one better suited to current price action.

Traders and Investors Alert: Does Rolling an Option Count as a Day Trade?

Before concluding, there's another question that many people are asking online: Does rolling an option count as a day trade? This is a topic that sparks much debate among traders, primarily due to the SEC limitations in the US on the topic. 

If you opened your original puts on a previous day and closed them as part of your roll, it's not considered a day trade. A day trade typically occurs when you open a position and close it on the same day. 

To help you keep this matter under control, many brokers provide a counter of day trades to avoid having your account flagged as performing pattern day trading. This way, you can continue rolling options without worrying about breaching day trading limits. If you're new to options, consult your broker or seek trading advice, as trading is not suitable for everyone and may carry significant risk.

Frequently Asked Questions on Rolling an Option

Is rolling options a good strategy?

Rolling options is a strategy that helps options traders manage risk and reward. It can lock in gains, reduce the risk of assignment, or give you more time for the stock to move in your favor. Like any investment strategy, it depends on your market view and the cost of rolling.

What happens when you roll an option?

Rolling your options means closing an existing options position and simultaneously opening a new one, often with a different strike or later expiration date. This adjustment allows you to stay in the trade while adapting to market conditions. This means closing your current position and opening a new one—sometimes at a different strike, and often set to expire at a later date.

Does rolling options count as a day trade?

Not always. If your existing position was opened on a previous day, then rolling it doesn’t count as a day trade. But if you open and close an option position on the same day, it may trigger pattern day trading rules depending on your broker and account type.

Can you roll options in a cash account?

Yes, but with limitations. In a cash account, you can roll your options only if you have enough settled funds to cover the cost of buying back the existing option and opening a new one. Margin accounts offer more flexibility.

Is rolling options worth it?

It depends. Rolling options can be worth it when you want to capture more time value, adjust your strike, or avoid a losing position becoming worse. But always consider the cost of rolling and how it affects your net credit or debit. It can also let you adjust your cost basis on a per share level depending on the premium received for selling the original contract.

Can you roll options after hours?

No, you can’t. Rolling options involves closing an existing contract and opening a new one, which requires the options market to be open. You’ll need to wait for regular trading hours.

When should I roll my options?

Options traders typically roll when the expiration approaches, the underlying security has moved unexpectedly, or the call you sold is in the money. Rolling to a longer-dated option or a higher strike may let you take profits, manage risk, or stay in the trade with a better setup. This is especially true when you’ve opened a call and selling strategy like a covered call that’s now in the money.