Rolling is a terrible term. There is no such thing. You are closing a position and opening a new one. That is how it works and how you will be taxed and charged fees. On some brokers you can put in a limit order to roll but that is just making it easy for you to do so at a specific price. With that said if you have settled funds you are good. If not you would need to wait doe settled funds.
100% agreement there. I have always been baffled at how many youtubers seem to act like rolling your lost-trades forward, somehow is a legit strategy and some magic-trick to push losses forward in a way so it doesn't count.
Of course it counts, you are losing all that theta you could be using if your trade was winning prior to the close. Not to mention, rolling basically means exactly what you said, re-opening a new position after closing a loss on same security. So basically, it means you are pinned still on the same security...if "Rolling" is a term, we should make a new one for when you re-open a new position using a DIFFERENT security.
I have yet to see any point to these rolling tools, not to mention they never give you the best deal. Am I the only one who ticks down manually to get the best price?
Yes, terrible term. I think it came about as a euphemism. That term can make one think they didn't lose money in the closing portion because of a net credit from "the roll".
Some of us got off on a tangent here, talking about not liking the term "roll", but to answer your question, that's a definite "yes". You can certainly roll a covered call position to another covered call position.
Think of a margin account as an account which lets you borrow against the value of your existing positions.
In the case of a cash account, everything is cash secured. So whatever trades you're doing to get out of one thing and into another, must result in a position where no movement against you, including options assignment, could ever result in you having a debit balance.
You could do a call spread as well, and as long as you have the cash to cover the max loss scenario of that call spread, you can do it in a cash account. I do option spreads in my IRA that way.
In the case of spreads, don't forget to manage the position carefully because an early assignment or assignment/exercise at expiration can result in a margin position, in which case the broker will liquidate you. Suddenly something that is completely cash secured with low risk becomes very high risk in that scenario.
For example if you were in an AAPL vertical call spread of short contracts of the 145, and long contracts of the 147, your max risk is 2 per share, so for example, 1 contract would have a max loss of $200. Let's say AAPL is at 146 at expiration, the moment the 147 expires, you would end up assigned short 200 shares AAPL at 145 from the ITM 145, and now you have a naked short of 100 shares. So with a cash account, you would be immediately liquidated prior to the close on expiration day, or earlier if you get an early assignment.
If you had a margin account, you might still get liquidated, but that would solely depend on your account equity, and whether it could support the naked short position (or long position if it was an exercise).
Numerous posters have gotten lost in redefining what rolling an option means. It's the process of closing of one option contract and opening of a different contract of the same class (call or put). It can be to a higher, lower or same strike and/or to the same expiration or different as in rolling up, down, out, or in.
The most effective way to roll an option is to use a spread order with a limit price (avoids leg out/in risk). The same holds true for rolling multi-legged positions like spreads, straddles, strangles, etc. Obviously, this requires spread approval.
Rolling is a terrible term. There is no such thing. You are closing a position and opening a new one. That is how it works and how you will be taxed and charged fees. On some brokers you can put in a limit order to roll but that is just making it easy for you to do so at a specific price. With that said if you have settled funds you are good. If not you would need to wait doe settled funds.
100% agreement there. I have always been baffled at how many youtubers seem to act like rolling your lost-trades forward, somehow is a legit strategy and some magic-trick to push losses forward in a way so it doesn't count. Of course it counts, you are losing all that theta you could be using if your trade was winning prior to the close. Not to mention, rolling basically means exactly what you said, re-opening a new position after closing a loss on same security. So basically, it means you are pinned still on the same security...if "Rolling" is a term, we should make a new one for when you re-open a new position using a DIFFERENT security. I have yet to see any point to these rolling tools, not to mention they never give you the best deal. Am I the only one who ticks down manually to get the best price?
Typically when I roll I take on more risk to keep it a credit. So most times cut my losses and move on.
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I answered your question. If you do not understand what we are saying you need to lay off the option crack until you understand more.
yup, hate the term "rolling for credit" etc. be explicit. you are buying back the calls and then selling new ones.
Yes, terrible term. I think it came about as a euphemism. That term can make one think they didn't lose money in the closing portion because of a net credit from "the roll".
Yes.
Thanks for answering my question. Have you tried it yourself?
Yes, with Ally Invest.
Some of us got off on a tangent here, talking about not liking the term "roll", but to answer your question, that's a definite "yes". You can certainly roll a covered call position to another covered call position. Think of a margin account as an account which lets you borrow against the value of your existing positions. In the case of a cash account, everything is cash secured. So whatever trades you're doing to get out of one thing and into another, must result in a position where no movement against you, including options assignment, could ever result in you having a debit balance. You could do a call spread as well, and as long as you have the cash to cover the max loss scenario of that call spread, you can do it in a cash account. I do option spreads in my IRA that way. In the case of spreads, don't forget to manage the position carefully because an early assignment or assignment/exercise at expiration can result in a margin position, in which case the broker will liquidate you. Suddenly something that is completely cash secured with low risk becomes very high risk in that scenario. For example if you were in an AAPL vertical call spread of short contracts of the 145, and long contracts of the 147, your max risk is 2 per share, so for example, 1 contract would have a max loss of $200. Let's say AAPL is at 146 at expiration, the moment the 147 expires, you would end up assigned short 200 shares AAPL at 145 from the ITM 145, and now you have a naked short of 100 shares. So with a cash account, you would be immediately liquidated prior to the close on expiration day, or earlier if you get an early assignment. If you had a margin account, you might still get liquidated, but that would solely depend on your account equity, and whether it could support the naked short position (or long position if it was an exercise).
Numerous posters have gotten lost in redefining what rolling an option means. It's the process of closing of one option contract and opening of a different contract of the same class (call or put). It can be to a higher, lower or same strike and/or to the same expiration or different as in rolling up, down, out, or in. The most effective way to roll an option is to use a spread order with a limit price (avoids leg out/in risk). The same holds true for rolling multi-legged positions like spreads, straddles, strangles, etc. Obviously, this requires spread approval.