Can you just keep rolling out losing positions endlessly?
- Thread starter IronFist
- Start date
I've followed some of the education from the gang at Tasty Trade and there is an argument you can just keep rolling and collecting credit until the stock reverts and you become profitable. I get it in theory but a couple caveats. One if the stock goes to zero you can roll puts for nothing as you'll still lose in the end. If the stock goes parabolic like being short calls in GME @ a strike of 60 before the WSB you're still fucked. In my mind the roll is a new trade and you lost on the first one. Calling a loser anything else is to me like putting lipstick on a pig. I just don't like ever selling naked options. Call me a pussy but anytime I see the infinity symbol on the risk side of the trade I'm gonna pass or at least buy a cheap wing. I was scarred by blowing up an account being left short a naked call when exiting a call spread in Minneapolis wheat over a decade ago. Never ever doing it again.
That must be a very good essay.
It is a very good strategy.
It works very well to deplete the trading account very fast.
There are traders who do revenge / very angry trading.
So this is one good strategy.
If every position you roll out of is a losing position, your account will drop to zero.
You are rolling out the position to cover the loss. Eventually your account will go to 0.
Rolling to infinity (lol) is possible only if you do it in an index of ETF like SPY and particularly on the put side. I hate calls!
The goal is to increase the extrinsic (time value) in your position. It's particularly effective if you are rolling a position against another position.
For example, Friday I will be rolling out an in the money short put in IWM for more extrinsic value. I also have a long put in IWM about six months out. The premium that I collect from the short puts is used to finance the long put and I have about 26 more weeks left to roll the position.
Most critics of rolling wouldn't have a clue how to begin, yet along explain the benefits. Stick with me, kid and I'll show ya a thing or two.
so a roll but not a naked roll. Good insights on the index with puts.
No eventually the losses will catch up to you. Karen "the super trader" tried to do this. And this is what happened: https://macro-ops.com/karen-the-supertrader-goes-rogue/
This is the same as ask do I have to sell stock who drops and I have loss on in it, or can I keep it as "paper" (unrealized) loss. The same is with rolling options, except you close your loosing position and realize loss, then you "revenge" your loss and open another position further in time with more premium (and more risk of course). Tastytrade tells you that you may roll it if your view doesn't change and you would open this position from the start, not forsed by "rolling". And, surprise! You would not, because it is in the money and it is completely out of tastytrade recommendations (sell out of the money options). Revenge trade nothing more.