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Ask Alan #172 – Rolling our Options: 2 Perspectives.

Alan answers a question posed by Roni, who asks:

Alan, When our strike is in-the-money at expiration, why not let the option be assigned and realize our profit. When we roll out or out-and-up, we lose threefold: * Lose on the spread * Probably get a debit * Add risk as an appreciated stock can go down soon Why not let the stock get assigned and buy it back on Monday if we still like the stock? Thanks, Roni

——— It’s the 2nd Wednesday of the month. Time for another original episode of Ask Alan. AA#172, “ Rolling our Options: 2 Perspectives.” If you want more “Ask Alan” videos, you can! Become a premium member today, and tune in to the educational power of the complete library!

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About Alan Ellman

Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing. Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.

5 Responses to “Ask Alan #172 – Rolling our Options: 2 Perspectives.”

  1. Roni July 8, 2020 5:05 pm #

    Alan,

    thank you for the detailed and clear explanation, it will certainly help me in my future decisions, and will avoid me from missing out on some good opportunities.

    I also hope this video will help other members when dealing with this crucial decision.

    Cheers – Roni

  2. Alan Ellman July 8, 2020 5:16 pm #

    Premium members:

    This week’s 5-page report of top-performing ETFs and analysis of the top-3 performing Select Sector SPDRs has been uploaded to your premium site. One and three-month analysis are included in the report. Weekly option and implied volatility stats are also incorporated.

    The mid-week market tone is located at the end of the report.

    For your convenience, here is the link to login to the premium site:

    https://www.thebluecollarinvestor.com/member/login.php

    NOT A PREMIUM MEMBER? Check out this link:

    https://www.thebluecollarinvestor.com/membership.shtml

    Alan and the BCI team

  3. Ned July 8, 2020 6:41 pm #

    Hi Alan,

    Here’s a current situation I’m contemplating.

    The current price for INO is 23.47.
    What would be wrong with STO tomorrow July 9th; 1 INO Put, with 7/10 expiration, at 30.00 strike for 6.40 premium. I see it would create a Naked Put but would expire in one day. Wouldn’t the odds be overwhelmingly in my favor, especially with a cushion of 6.53.

    What am I missing here. Your input would be greatly appreciated.

    Thanks,
    Ned

    • Alan Ellman July 9, 2020 6:21 am #

      Ned,

      This is a trade that should be avoided. Selling the $30.00 put, obligates us to buy at $30.00, currently a loss of $6.53. In return, we are compensated $6.40, a loss of $13.00 per contract (-0.55%).

      See the screenshot below..

      This can be a winning trade in the unlikely event that INO moves above the $30.00 put strike by expiration tomorrow.

      CLICK ON IMAGE TO ENLARGE & USE THE BACK ARROW TO RETURN TO BLOG.

      Alan

      • Ned July 10, 2020 5:12 am #

        Thank you for the clarification. Again, you saved me from myself!

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