Here, we'll discuss different methods for rolling options, whether you're looking to adjust your position out, up, or down. For example, you might sell to close a January 50 call, and simultaneously buy to open a March 50 call.

7 Best Options Trading Examples • • Benzinga

There are two scenarios where it makes sense to roll out. In the first, you've pinpointed a winning options strategy, and you feel confident the directional move will continue to play out in your favor. By taking profits on the shorter-term trade and simultaneously initiating the longer-term trade, you're positioned to keep gaining from a prolonged move in your favor.

In the second, you still feel confident in your original prediction for the stock -- but you've decided that more time is necessary for the trade to play out as you expect. In this instance, you're essentially buying more time for the shares to live up to your expectations. In both cases, rolling out should be approached with caution.

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Under the first scenario, be certain that the outlook for the stock continues to support your trade thesis, and that you're not simply getting greedy after a healthy winner. In the second example, again -- reexamine your rationale for the trade. Does the stock simply need a few more weeks to move in your favor, or is it time to admit that your initial analysis may have been off-base? If you've played a call option and the stock makes a quick, dramatic move in your favor, rolling up is a way to raise the bullish stakes: you sell to close your existing call option at a profit, and buy to open a higher-strike call for ideally a smaller amount of capital.

In this way, you've locked in some gains on your initial trade, and you've also acquired some fresh leverage to profit from a continued move higher.

A +52% Profit Trading Example...

You may also decide to roll up if you've written a covered call, and the stock has made a move higher that puts you at risk of potential assignment. The existing short option will be bought to close, while a higher-strike call will be sold to open. In the best-case scenario, the credits received from the sold calls at both the original strike and the "rolled up" strike will be sufficient to offset your buy-to-close costs and any additional brokerage fees and commissions. Of course, these are a just a few examples, as there are other scenarios where rolling up may also make sense.

For example, if you're selling puts on a stock to bet on technical support, and the stock has risen significantly above your selected strike, you might roll up to collect a higher premium. Inverting the example above, you may choose to roll down if you've purchased put options that returned significant gains in your favor shortly after they were initiated. By selling to close the in-the-money options and exchanging them for cheaper puts at a lower strike, you can capitalize on a continued move lower by the shares.

Alternately, you might roll down a short call position if the underlying stock is trending lower, or roll down a short put if the stock is dropping and you hope to avoid assignment. Any of the above tactics for rolling options can be combined to suit your needs. For example, if you'd like to extend a winning call trade, you might choose to roll the option up and out, selecting both a higher strike and a longer-dated series.

As indicated above, however, be sure that you're not rolling options to forestall an inevitable loss.

Scenarios: Strategies for trading Goldman Sachs securities

That Humana, Inc. If I were looking to earn a better return on my money than my mutual funds, then I'd be done right here. I wouldn't have to make another trade for the rest of the year. Heck, I could take two years off and still beat my mutual fund. I'm joking but I think you get my point.

And if you are "not" earning the types of returns shown above then I highly suggest you practice the strategy taught in this web based course.

Please proceed to the next lesson to try out the Minute Strategy yourself. I don't know what has brought you to my page.

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Maybe you are interested in options to help you reduce the risk of your other stock market holdings. Maybe you are looking for a way to generate a little additional income for retirement. Or maybe you've just heard about options, you're not sure what they are, and you want a simple step-by-step guide to understanding them and getting started with them. I have no idea if options are even right for you, but I do promise to show you what has worked for me and the exact steps I've taken to use them to earn additional income, protect my investments, and to experience freedom in my life.

Advanced Options Strategies

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Free Video Case Study Newsletter. MarketClub Stock Trading Software. Module 5: Technical Indicators. Trader Travis's YouTube Channel. The Options Trading Group, Inc. All rights reserved. While it is believed to be accurate, it should not be considered solely reliable for use in making actual investment decisions. Futures and options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets.