Options Roll Up

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DEFINITION of 'Options Roll Up'

The move from one option position to another that has a higher exercise price. A roll up is a trading action whereby an investor or trader closes an open option position while simultaneously opening a new option position that has a higher strike price or a different expiration, or both. A roll up is typically performed if an investor is bullish on an underlying instrument, such as a stock, and he or she believes the price will rise. This is the opposite of a "roll down" in which an investor simultaneously closes one position and opens another with a lower strike price.

BREAKING DOWN 'Options Roll Up'

If the new contract involves a higher strike price and a later expiration date, the strategy is called a "roll-up and forward." If the new contract is one with a lower strike price and later expiration date, it is called a "roll-down and forward." A roll up is one of several options strategies for rolling, which is entering a new position while concurrently closing an existing one. Options traders use rolling strategies to respond to changing market conditions and to secure profits, limit losses and manage risk.

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RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. How do I determine the breakeven point for a short put?

    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 >>
  4. What options strategies are best suited for investing in the retail sector?

    Retail is a broad sector whose seven discrete segments all exhibit greater volatility than the broader market. The sector ... Read Full Answer >>
  5. What techniques are most useful for hedging exposure to the telecommunications sector?

    A couple of option strategies can be used to hedge exposure to the telecommunications sector. Certain option strategies can ... Read Full Answer >>
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    Investors who are bullish on the industrial sector can use a covered call option strategy to earn additional income from ... Read Full Answer >>

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