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Roll Forward

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Dictionary Says

Definition of 'Roll Forward'

To extend the expiration or maturity of an option or futures contract by closing the initial shorter-term contract and opening a new longer-term contract for the same underlying asset. A roll forward enables the trader to maintain the investment position beyond the initial expiration of the contract (since options and futures contracts have finite expiration dates) and is usually carried out shortly before expiration of the initial contract. Both legs of the roll forward are typically executed simultaneously, in order to reduce slippage (i.e. profit erosion) due to a change in the price of the underlying asset.
Investopedia Says

Investopedia explains 'Roll Forward'

A roll forward can be executed at the same strike price for both contracts, the initial shorter-term contract and the new longer-term one. However, if the new contract has a higher strike price than the initial contract, the strategy is called a "roll up"; if the new contract has a lower strike price, it is called a "roll down."

These strategies may be undertaken to protect profits or hedge against losses. For example, consider a trader who has a call option expiring in June with a $10 strike price on Widget Co. stock trading at $12. As the call option nears expiration, if the trader remains bullish on Widget Co., she can choose to maintain her investment stance and protect profits by (a) selling the June call option, and (b) simultaneously buying a call option expiring in September with a strike price of $12. This "roll up" to a higher strike price will reduce the cost of the position, thereby protecting part of the profits from the initial strategy.

Directory (Option Strategy)

  1.

    Alligator Spread

  2. Atlantic Spread

  3. Back Fee

  4. Backspread

  5. Bailard, Biehl And Kaiser Five-Way Model

  6. Bear Call Spread

  7. Bear Put Spread

  8. Bear Spread

  9. Bear Straddle

  10. Box Spread

  11. Bull Call Spread

  12. Bull Put Spread

  13. Bull Spread

  14. Bullet Trade

  15. Butterfly Spread

  16. Buy A Spread

  17. Calendar Spread

  18. Call Ratio Backspread

  19. Collar

  20. Collar Agreement

  21. Condor Spread

  22. Contingent Order

  23. Conversion Arbitrage

  24. Covered Call

  25. Covered Combination

  26. Covered Straddle

  27. Credit Spread

  28. Death Put

  29. Debit Spread

  30. Delta Hedging

  31. Delta Neutral

  32. Delta Spread

  33. Diagonal Spread

  34. Dividend Arbitrage

  35. Double One-Touch Option

  36. Fence (Options)

  37. Fiduciary Call

  38. Fixed Dollar Value Collar

  39. FMAN

  40. Forex Hedge

  41. Forex Option & Currency Trading Options

  42. Form 6781: Gains And Losses From Section ...

  43. Front Fee

  44. Gut Spread

  45. Heston Model

  46. Horizontal Spread

  47. Implied Volatility - IV

  48. Interest Rate Collar

  49. Iron Butterfly

  50. Iron Condor

  51. Leg

  52. Leg Out

  53. Long Jelly Roll

  54. Long Leg

  55. Long Put

  56. Long Straddle

  57. Long-Term Equity Anticipation Securities ...

  58. Married Put

  59. Modidor

  60. Multi Index Option

  61. Multi-Leg Options Order

  62. Naked Call

  63. Naked Option

  64. Naked Position

  65. Naked Put

  66. Negative Butterfly

  67. Net Option Premium

  68. Neutral

  69. Option Premium

  70. Outright Option

  71. Overwrite

  72. Overwriting

  73. Positive Butterfly

  74. Protective Put

  75. Put Calendar

  76. Put On A Call

  77. Put On A Put

  78. Put Ratio Backspread

  79. Put To Seller

  80. Ratio Call Write

  81. Ratio Spread

  82. Reverse Calendar Spread

  83. Reverse Conversion

  84. Risk Reversal

  85. Roll Down

  86. Roll Forward

  87. Roll Up

  88. Seagull Option

  89. Sell To Open

  90. Series 4

  91. Short Leg

  92. Short Straddle

  93. Straddle

  94. Strangle

  95. Swing Option

  96. Synthetic Dividend

  97. Variable Ratio Write

  98. VIX Option

  99. Writing An Option

  100. Zero Cost Collar

  101. Zomma

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