Unit 4 · Level 2 · Managing the book
Rolling
'Just roll it' is the most repeated advice in options forums. A roll is nothing mystical: you close your current position and open a new one (usually further out in time, maybe at a new strike) in a single combined order. That's it. The loss on the old trade doesn't vanish; it's baked into the prices. Rolling 'for a credit' feels like getting paid, but what you're really doing is selling more time and more risk to finance the retreat.
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What you get asked
What IS a roll, mechanically?
Close plus reopen, netted into one ticket. Nothing is 'extended'. The old trade ends at today's market price, loss and all, and a brand-new one begins.
A roll is a close plus a ___ executed as one order.
Two independent trades in a trench coat. Judge the reopen exactly as you'd judge any fresh position, because that's what it is.
Order what actually happens when you roll a short put 'out and down'
Seeing the roll as two trades keeps you honest: the old one is finished and scored; the new one must earn its place in your book.
When is rolling genuinely a good decision?
The one-question test again: fresh capital, fresh eyes, would you place this trade? A credit received is not a reason; it's just the new trade's price tag.
The myth says 'you can roll forever and never take a loss.' What breaks it?
When a short put is deep ITM, later expiries offer little extra premium. Rolls start costing debits, and each one adds time for things to get worse. Eventually reality invoices you. 🐜
The rest of this unit
Rolls, profit rules, assignment surprises: running a spread book like a professional.