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Can I "roll over" my Options contract month over month?
- Thread starter Hoofhearted
- Start date
For what it's worth Cramer isn't completely wrong here. He is discussing rolling Deep ITM options. in that case, there often isn't alot more cost compared to what the call costs anyway depending of course on the IV of the underlying and just how deep ITM.
Just as a quick example, I looked at BA, which is at 74.21
The Aug 65 calls are:
9.15/9.25
Sept 65s are:
9.15/9.25
Nov 65s are:
9.60/9.75
So if you had Aug 65 calls, it doesn't cost much to roll to Sep or all that much to go all the way to Nov.
Of course, rolling ATM options will cost quite a bit more.
Just as a quick example, I looked at BA, which is at 74.21
The Aug 65 calls are:
9.15/9.25
Sept 65s are:
9.15/9.25
Nov 65s are:
9.60/9.75
So if you had Aug 65 calls, it doesn't cost much to roll to Sep or all that much to go all the way to Nov.
Of course, rolling ATM options will cost quite a bit more.
Quote from hajimow:
Rolling over an option == closing the existing position ( either buying or selling) and then opening a new position (either selling or buying) for another month. IB also calls it rollover. You can do it in two ways:
1- do it manually (you might get better deals)
2- do it in a combo order (less risk because one leg might not run away from you after you do the first leg).
You can rollover spread or complex option trades and then doing it in combo will be quite interesting and if the option is not a heavily traded, you might need to settle on the bid price if you are selling and on the ask price if you are selling.
I could not find "rollover" listed in listing of combination orders on IB. Where can I find this strategy listed there? Thanks
Go into the options trader.... there is a tab called combo in the orders section... click it.. the pick the option your in and the one you wanna roll into... then press the add to quote monitor.. and you will see the combination bid and ask.. depending on how you arranged the combo will be weather your buying it or selling it
.. if you selling the front month buying the back month.... your actually buying that combo...
.. if you selling the front month buying the back month.... your actually buying that combo...
Quote from Put_Master:
Before you decide to roll, (get back in the same stock), let me make one suggestion.
First look around.
Are there better stocks to be in? Are they a better value?
Are there better option trades in other stocks to consider? Might they be safer and/or offer a similar credit as the previous one?
Is there a reason you want to try to make money with the same stock again, vs making the same money in another stock?
Isn't a credit earned in one stock valued the same, as the same credit in another stock, assuming the same cash at risk per unit of time?
Are you merely trying to "get even" in the same stock for ego purposes?
You need to explain to yourself why you think riding this same stock up higher, is a better idea than riding another,.... which may actually be a better value.
Rolling is merely an investment choice. It's not always the correct choice.
These are great questions I had to ask myself.
The wave I'm wanting to ride is gold spdr (GLD) etf's. I believe its future looks good, but am willing to consider any advice here.
The biggest question I've been having is- well maybe it's easier to explain my dilema....
I would like to break up a rather large investment into segmants and then make layered purchases for a few reasons: Cramer says to do it because I may be wrong and the bottom be a little lower than i thought, so its best to have some more purchase money when it does go lower, instead of being entirely underwater because you bought too much too fast- and if I was right and the market starts to head up, I just wait for another pullback to get in...makes sense to me.
What I'm having a hard time getting my head wrapped around is whether I'm best to place calls in the closer months(sept or oct) as opposed to going way out (Like MAR 13).
My worry about not going out far enough out is this:If the market takes a unexpected dive, say sometime in sept or oct, I could be out alot of money because we all know how long gold can take to recover. The MAR calls are at a premium for sure if I'm wanting to be anywhere near flat on the trade, but the insurance of having adequate recovery time sounds awfully important to ignore. Is the premium justified or am I simply over paying for too much insurance at this entry point?
Also, I'm wondering if at a certain point going too deep in the money is just getting ridiculous as well as a good way to tie up alot of investment money for smaller returns.
For instance, GLD is at 157.18. An OCT12 143.00 call is under $15, putting me close to flat for $1500 per contract.
An OCT12 108.00 call is just under $50, putting me a tiny bit closer to flat, for $5000 per contract- but with ALOT more fall insurance. Again, am I overpaying for this much insurance?
I should probably keep asking myself these questions and doing the math over again, but my ears are definitely open to some other thoughts here.
p.s. I like Cramer because of the fundamentals he teaches- not for his picks. I agree with the opinion that CNBC can fill your head with alot of noise if you let it. I value alot of what I'm reading right here as well.
<<< I would like to break up a rather large investment into segmants and then make layered purchases for a few reasons: Cramer says to do it because I may be wrong and the bottom be a little lower than i thought, so its best to have some more purchase money when it does go lower, instead of being entirely underwater because you bought too much too fast- and if I was right and the market starts to head up, I just wait for another pullback to get in...makes sense to me. >>>
The specific sector and stock you are asking about is one of the sectors I don't invest in, so unfortunately I don't have an opinion on it.
HOWEVER, I will address the issue you discussed above:
If you feel you are not very good at analyzing a stocks value, both technically and fundamentally, then I agree with Cramer. Better to ease into it over time at various prices.
DanShirley is an example of someone who should follow that advice as well, as his criteria for investing in a stock, is to actually wait until the stock is at or near its multi year high. He is a trend follower. Not a technical or fundamentalist.
But we each have our own prefered investment styles.
On the other hand, if you are actually pretty good at analyzing a company for price value and financial health,... (and I'm NOT talking about PE, as that is the one criteria I ignore as meaningless),... and you are good at determining L-T tech support, per the 1 - 2 year chart, then I suggest a different approach to investing.
It does not occur very often, that a financially healthy stock is actually trading not only at a good price value, but also at or near L-T technical support.
When i see a situation like that, I don't want to risk losing that fantastic opportunity, by just nibbling at it with a small % of the cash I set aside for it.
Stocks in that situation don't linger there long. Thus, I grab everything I want at that price. And if you are wrong, because of a bad market, those type stocks eventually recover. In fact, they are the first to recover.
Remember, Cramer is talking to thousands of investors, with various amounts of investment cash, degrees of knowledge, experience, time to analyze their stocks, tolerance for risk taking, and so on. Thus he uses broad generalizations when talking to the camera.
So analyze yourself, before you analyze a stock. Only you know who you are as an investor, in terms of the above issues and questions.
The specific sector and stock you are asking about is one of the sectors I don't invest in, so unfortunately I don't have an opinion on it.
HOWEVER, I will address the issue you discussed above:
If you feel you are not very good at analyzing a stocks value, both technically and fundamentally, then I agree with Cramer. Better to ease into it over time at various prices.
DanShirley is an example of someone who should follow that advice as well, as his criteria for investing in a stock, is to actually wait until the stock is at or near its multi year high. He is a trend follower. Not a technical or fundamentalist.
But we each have our own prefered investment styles.
On the other hand, if you are actually pretty good at analyzing a company for price value and financial health,... (and I'm NOT talking about PE, as that is the one criteria I ignore as meaningless),... and you are good at determining L-T tech support, per the 1 - 2 year chart, then I suggest a different approach to investing.
It does not occur very often, that a financially healthy stock is actually trading not only at a good price value, but also at or near L-T technical support.
When i see a situation like that, I don't want to risk losing that fantastic opportunity, by just nibbling at it with a small % of the cash I set aside for it.
Stocks in that situation don't linger there long. Thus, I grab everything I want at that price. And if you are wrong, because of a bad market, those type stocks eventually recover. In fact, they are the first to recover.
Remember, Cramer is talking to thousands of investors, with various amounts of investment cash, degrees of knowledge, experience, time to analyze their stocks, tolerance for risk taking, and so on. Thus he uses broad generalizations when talking to the camera.
So analyze yourself, before you analyze a stock. Only you know who you are as an investor, in terms of the above issues and questions.
Quote from Put_Master:
Remember, Cramer is talking to thousands of investors, with various amounts of investment cash, degrees of knowledge, experience, time to analyze their stocks, tolerance for risk taking, and so on. Thus he uses broad generalizations when talking to the camera.
So analyze yourself, before you analyze a stock. Only you know who you are as an investor, in terms of the above issues and questions.
this makes alot of sense.... deep in the money call dollar cost averaging .. getting back to zero is sort of this mean reversion trading style that depends on stocks coming back to their originating point of first entry... I get it.. Remember leverage comes at a cost.. the closer to the money you get the more you pay in premium for the leverage... but the less dollar risk you have in the trade.. Timing on trades is by far the most elusive and strange alchemy in trading... you have to develop your own sense of intuition on this... and like putty man said.. don't use off the self fundamental indicators.. like P/E ratio.. thats what everyone else is looking at.. so your betting on the future fundamentals of the gold story.. inflation risk.. flight from risk.. etc.. etc.. maybe your better off with a buy write strategy instead of thinking your going to get some blow off top kind of profit on some straight premium purchase... think about this
whats the difference between putting up trades that have a 3 to 1.. or 5 to 1 payout percent gain and rolling them out rather then putting up alot more cash for lower percentage returns... the dollar amount is the same.. but the value at risk is alot lower.. i want to ask... what time frame are we talking for this trade? because if your using options you should have this already spec-ed out... meaning you should have an investment time considered.. cause your exposing yourself to time risk when buying options.. IE time premium/theta etc.
<<< and like putty man said.. don't use off the self fundamental indicators.. like P/E ratio.. thats what everyone else is looking at.. >>>
The reason i don't pay much attention to PE ratio is not because so many other investors also look at it.
I tend to ignore it, because it is waaaaay to easy to manipulate.
Management can easily make their stocks PE look a lot better than it really is.
Hence the reason have a list of 45 - 50 fundamental criteria I review, once a stock is in the tech support area i want, for the strike and credit i desire.
I use that list of 45 - 50 fundamental criteria, to paint an overall picture of the companies financial health, price value at my strike, timing of when and/or "if" to get in, and so on...
PE ratio just doesn't do the job for me. I need an overall picture of what's going on. Too easy to manipulate the picture with just a few basic criteria. But with multiple dozens of criteria, evaluating multiple areas, I can usually spot if the company is attempting to paint a misleading picture. And that is a big fat red flag.
The reason i don't pay much attention to PE ratio is not because so many other investors also look at it.
I tend to ignore it, because it is waaaaay to easy to manipulate.
Management can easily make their stocks PE look a lot better than it really is.
Hence the reason have a list of 45 - 50 fundamental criteria I review, once a stock is in the tech support area i want, for the strike and credit i desire.
I use that list of 45 - 50 fundamental criteria, to paint an overall picture of the companies financial health, price value at my strike, timing of when and/or "if" to get in, and so on...
PE ratio just doesn't do the job for me. I need an overall picture of what's going on. Too easy to manipulate the picture with just a few basic criteria. But with multiple dozens of criteria, evaluating multiple areas, I can usually spot if the company is attempting to paint a misleading picture. And that is a big fat red flag.
"maybe your better off with a buy write strategy instead of thinking your going to get some blow off top kind of profit on some straight premium purchase... think about this
whats the difference between putting up trades that have a 3 to 1.. or 5 to 1 payout percent gain and rolling them out rather then putting up alot more cash for lower percentage returns... the dollar amount is the same.. but the value at risk is alot lower.. i want to ask... what time frame are we talking for this trade? because if your using options you should have this already spec-ed out... meaning you should have an investment time considered.. cause your exposing yourself to time risk when buying options.. IE time premium/theta etc."
Again- more great questions.
I'm not sure what a buy write strategy is. That is to say- I'm sound on the basics of a call/put strategy, and I feel confident there is money to be made with these strategies(I prefer calls to puts though), but the more advanced methods still elude or confuse me.
The difference I see between putting up trades with the 3 to 1 or 5 to 1 payouts, compared to the way deep, and way out calls at a premium, is the insurance.
I'm afraid that if I buy too cheap, just for the higher profits sake, then could I get caught with my pants down, and the stock just wont have time to recover. If I'm forced to roll-out when i'm under water, it will cost a much higher premium than if I simply buy myself time now, while the premium is relatively low.
The time frame in which I believe the stock will rise 20% or more is 4-6 months.
My strategy is something like this:
30k split into segmants.
10k for SEPT and OCTcalls(higher profits, but higher risk if the stock still takes an unforseen dip in the very near future)
10k for NOV calls(a little less profits, but a fair amount of recovery insurance)
10k for MAR13 deep ITM calls. (Maximum insurance if the stock falls unexpectedly, in my limited way of thinking)
If the stock does rise 20% by MAR, then I will still make a 50% return on the MAR13 108.00 calls- this would seem to be better than a stick in the eye.
A big question I have is, What are my biggest risks of buying the MAR13 calls? The only risk I can really come up with is not getting stellar profits, i.e. 200-400% returns.
This is where I hope the cheaper, earlier calls that are closer to the money(SEPT, OCT) will pay the most, especially if I sell at the peaks, then wait for 2-3% pullbacks along the way before getting back in.
If I get up early enough, I may try and use puts for the down strokes, but puts make me nervous, and I've been burned on them. In my mind the market will only go down so much, but will always go up at some point, and continually higher in the long run.
whats the difference between putting up trades that have a 3 to 1.. or 5 to 1 payout percent gain and rolling them out rather then putting up alot more cash for lower percentage returns... the dollar amount is the same.. but the value at risk is alot lower.. i want to ask... what time frame are we talking for this trade? because if your using options you should have this already spec-ed out... meaning you should have an investment time considered.. cause your exposing yourself to time risk when buying options.. IE time premium/theta etc."
Again- more great questions.
I'm not sure what a buy write strategy is. That is to say- I'm sound on the basics of a call/put strategy, and I feel confident there is money to be made with these strategies(I prefer calls to puts though), but the more advanced methods still elude or confuse me.
The difference I see between putting up trades with the 3 to 1 or 5 to 1 payouts, compared to the way deep, and way out calls at a premium, is the insurance.
I'm afraid that if I buy too cheap, just for the higher profits sake, then could I get caught with my pants down, and the stock just wont have time to recover. If I'm forced to roll-out when i'm under water, it will cost a much higher premium than if I simply buy myself time now, while the premium is relatively low.
The time frame in which I believe the stock will rise 20% or more is 4-6 months.
My strategy is something like this:
30k split into segmants.
10k for SEPT and OCTcalls(higher profits, but higher risk if the stock still takes an unforseen dip in the very near future)
10k for NOV calls(a little less profits, but a fair amount of recovery insurance)
10k for MAR13 deep ITM calls. (Maximum insurance if the stock falls unexpectedly, in my limited way of thinking)
If the stock does rise 20% by MAR, then I will still make a 50% return on the MAR13 108.00 calls- this would seem to be better than a stick in the eye.
A big question I have is, What are my biggest risks of buying the MAR13 calls? The only risk I can really come up with is not getting stellar profits, i.e. 200-400% returns.
This is where I hope the cheaper, earlier calls that are closer to the money(SEPT, OCT) will pay the most, especially if I sell at the peaks, then wait for 2-3% pullbacks along the way before getting back in.
If I get up early enough, I may try and use puts for the down strokes, but puts make me nervous, and I've been burned on them. In my mind the market will only go down so much, but will always go up at some point, and continually higher in the long run.
"A big question I have is, What are my biggest risks of buying the MAR13 calls? The only risk I can really come up with is not getting stellar profits, i.e. 200-400% returns."
Oh yeah and the fact that gold could drop 20% and I could lose most or all of my money.
I don't see it though, as long as its been sitting. Just like I can't see gas going under the $3.00 mark again either. I just can't help but think that the dollar is going down and gold is going up, just like it's been for as long as I remember. I want to be in on it, and I'm willing to risk a large portion of my earnings. Thanks for your helps. I get more in 2 sentences from listening to you guys in conversation than I do reading entire books and websites.
Oh yeah and the fact that gold could drop 20% and I could lose most or all of my money.
I don't see it though, as long as its been sitting. Just like I can't see gas going under the $3.00 mark again either. I just can't help but think that the dollar is going down and gold is going up, just like it's been for as long as I remember. I want to be in on it, and I'm willing to risk a large portion of my earnings. Thanks for your helps. I get more in 2 sentences from listening to you guys in conversation than I do reading entire books and websites.