Options Rolls: New Tools That Work Your Complex Strategy

thinkorswim’s Strategy Roller™ takes out some of the guesswork for when and how to roll options positions.

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String on your finger? Alarm on your smart phone? Forget it. The thinkorswim® platform's Strategy Roller™ takes out some of the guesswork for when and how to roll options positions.

If you’re a covered-call trader, you know the drill: sell calls against your long-stock position and as expiration gets closer, think about how to roll short calls from one month to the next.

And you’re generally going to roll for two reasons. First, if a short call is in the money, rolling means your stock likely will not be be called away (there is always some risk of it being called away or assigned). Second, regardless of whether your option is set to expire in, or out, of the money, rolling allows you to replace an option that has little-to-no time value with an option that has time value. Typically, the more time value an option has, the greater the profit potential in your covered-call position.

Of course, there’s more to it. What’s the prognosis for the underlying stock over the next month? How soon should you start trying to roll? At what point might you switch from a limit order to a market order, and wrap up the transaction?

That’s a long list to deal with in the trenches of a challenging market. And that’s just for one stock. Think about the workload if that checklist applied to several of your options trades. Even the best multi-tasker can use some help and increasingly, tools are taking on some of the burden. At the least, these gadgets leave you better informed as you push the various buttons.

Introducing Strategy Roller

One such tool is the thinkorswim platform's Strategy Roller™. It automatically generates orders to roll any covered-call position from one expiration to another based on the conditions and preferences you’ve selected.

For instance, let’s say you’re long 100 shares of stock, and short one call option. Selling a call option against your stock position each month allows you to potentially collect the option premium as income (minus the applicable transaction fees). But this means that as you get closer to option expiration, you have to think about rolling your option in order to maintain your covered call position.

A covered call currently in the money

FIGURE 1 A covered call currently in the money and about to expire, tracked under the Monitor tab. For illustrative purposes only. Past performance does not guarantee future results.

The first condition is setting the strike price to which you will roll an existing option position. You might first tell Strategy Roller how many strikes away from the money you want the new option to be: i.e., a value of “0” tells the platform to use the at-the-money strike; a positive value selects an out-of-the-money strike; and a negative value selects an in-the-money strike. For example, setting a value of “2” selects an option that is two strikes out of the money, while a value of -1 selects an option one strike in the money.

Alternatively, you could select a strike based on the option delta. A delta of 50 indicates an at-the-money option; a delta higher than 50 equates to an in-the-money option; a delta below 50 gives you an out-of-the-money option.

Once you decide on your roll strike, pick your target expiration. Choosing a shorter-term expiration allows you to potentially collect premiums with greater frequency but may incur frequent trading costs as well. On the other hand, while a longer-term expiration may delay your potential credit, it introduces the opportunity to collect potentially larger premiums due to the increased time value in longer-term options.

Within the tool, the default setting reads “+1 EXP,” which means you want to roll to the next standard expiration. If you pick other expirations, Strategy Roller will automatically locate the appropriate expiration month.

Every Strategy Roller trade begins as a limit order that defaults to the midpoint price. You can decide how many days prior to expiration you want to start to roll your covered call.

If you were to roll your position manually, it’s likely you’d act with more urgency the closer you got to expiration. Strategy Roller mimics this tendency by pricing your limit order more aggressively as expiration approaches.

The Good News? It’s Automatic

Since Strategy Roller allows you to set the initial conditions for each roll transaction, you not only reduce the time spent each month thinking about how to roll, and how to roll multiple positions, but you save yourself the trouble of making all your rolling decisions at one time under pressure.

With well-executed moves, you also potentially avoid some of the costs associated with a failure to roll, including losing out on a potential periodic income stream, having your stock called away, or possibly enduring some unanticipated tax consequences that may come from the premature sale of your stock. Keep in mind, rolling strategies can entail substantial transaction costs, including multiple commissions, which impact potential return.

If you’re comfortable trading options, covered calls can be a great start in Strategy Roller. From there, Strategy Roller can assist with any strategy that tends to be extended over time, including married puts, collars, and diagonal spreads.

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Not yet using the thinkorswim trading platform? Get your feet wet or dive right in thanks to the powerful resources within thinkorswim.


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Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.

Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

A covered call strategy can limit the upside potential of the underlying stock position, as the stock would likely be called away in the event of substantial stock price increase. Additionally, any downside protection provided to the related stock position is limited to the premium received. (Short options can be assigned at any time up to expiration regardless of the in-the-money amount.)

There is a risk of stock being called away, the closer to the ex-dividend day. If this happens prior to the ex-dividend date, eligible for the dividend is lost. Income generated is at risk should the position moves against the investor, if the investor later buys the call back at a higher price. The investor can also lose the stock position if assigned.

The maximum risk of a covered call position is the cost of the stock, less the premium received for the call, plus all transaction costs.

Rolling strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return. These are advanced option strategies and often involve greater risk, and more complex risk, than basic options trades.


Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

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