Long Jelly Roll

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DEFINITION of 'Long Jelly Roll'

An option strategy that aims to profit from a time value spread through the sale and purchase of two call and two put options, each with different expiration dates.

BREAKING DOWN 'Long Jelly Roll'

A jelly roll is created by entering into two separate positions simultaneously. One position involves buying a put and selling a call with the same strike price and expiration. The second position involves selling a put and buying a call. The strike prices of the put and call in the second position are identical but different from the previous position, and the duration of the second position is longer than the previous position. This position creates a synthetic near-term short position and long-term long position that work to capitalize upon the time differential between futures prices.

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RELATED FAQS
  1. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  2. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  3. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  4. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  5. What are common delta hedging strategies?

    The term delta refers to the change in price of an underlying stock or exchange-traded fund (ETF) as compared to the corresponding ... Read Full Answer >>
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    The breakeven point for a short put is the strike price of the option minus the premium. Selling puts is a way for traders ... Read Full Answer >>

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