Roll Covered Call Option

To roll covered call option or not to roll? That is the question. Ok, so you have sold a covered call on your stock and it is approaching expiration. What can you do now?

If the call is close to expiration you probably have a good idea whether or not you are going to get called out of that option. If the option is ITM or the strike price is below the price of the stock then you will probably be called out, unless of course you buy back the option.

But what if the option is OTM and is nearly worthless. There are many times when the call on a stock would be worth $.05 and still has 1 week before expiration. In this case you can choose to either let the option sit and slowly make that extra $.05 or to roll your options to a later date.

If you choose to roll your option you will buy back your option and sell another option at a later date. For example if the next month’s option contract is selling at $.80 and your current call option is trading at $.05 it could definitely be worth it to buy it back at $.05 and sell another one for $.80.

This could potentially be more profitable then letting the other option melt away before buying the next months, but it is up to you to decide to roll or to stay put.

How To Roll Covered Calls

Each broker has a slightly different way of doing this so you should check with your broker to get the step by step procedure you must take. My broker allows me to click on the option I want to roll scroll down to “roll option” and then enter specifics. I imagine most brokers work in a similar way.

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