Rolling Covered Calls

Rolling is the process of closing your current covered call and opening a new one at a different strike and/or expiration. It's an essential skill for covered call traders.

Types of Rolls

Roll Out (Same Strike, Later Expiration)

When: You want to keep the same strike but need more time

How: Buy to close current call, sell to open same strike at later date

Purpose: Collect more premium without changing strike

Roll Up and Out (Higher Strike, Later Expiration)

When: Stock is approaching your strike and you want to keep shares

How: Buy to close, sell higher strike at later expiration

Purpose: Avoid assignment, potentially for a credit

Roll Down (Lower Strike, Same/Later Expiration)

When: Stock has dropped significantly

How: Buy to close current call, sell lower strike

Purpose: Capture more premium on a fallen stock

When to Roll

Roll when:

Stock is within 1-2% of strike with time remaining

You can roll for a net credit

You still want to own the stock

Don't roll when:

You'd have to pay a debit to roll

You no longer want to own the stock

Assignment would be profitable