Roll Down

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Dictionary Says

Definition of 'Roll Down'


The replacement of an option with a new option that has a lower strike price. The use of a roll down means that the investor does not have to exercise the option. Instead, the investor extends the time period over until the investment expires.

Investopedia Says

Investopedia explains 'Roll Down'


A roll down strategy can help an investor mitigate losses when the underlying asset is declining in value. For example, an investor who has purchased a securities option to purchase 100 shares believes that the value of shares is going to decline. The investor sells a call with a higher strike price and earns a premium. The stock does decline in value and the call is now worth less. The investor cancels the call and makes a profit. Then the investor sells another call with a new strike price and receives a premium on that option as well.

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