Options Roll Up

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Binary Option

    A type of option in which the payoff is structured to be either ...
  2. Covered Straddle

    An option strategy that involves writing the same number of puts ...
  3. Option

    A financial derivative that represents a contract sold by one ...
  4. Knock-In Option

    A latent option contract that begins to function as a normal ...
  5. Knock-Out Option

    An option with a built in mechanism to expire worthless, should ...
  6. Exotic Option

    An option that differs from common American or European options ...
Related Articles
  1. Options & Futures

    What is an Iron Butterfly Option Strategy?

    This relatively simple strategy is designed to provide a profit for investors who believe that there will be minimal price movement in the underlying security until expiration.
  2. Options & Futures

    Naked Call Writing: A Risky Options Strategy

    Learn about this aggressive trading strategy to generate income as part of a diversified portfolio.
  3. Options & Futures

    Options Trading With The Iron Condor

    This options strategy allows your profits to soar in a sideways market.
  4. Options & Futures

    Profit On Any Price Change With Long Straddles

    In this strategy, traders cash in when the underlying security rises - and when it falls.
  5. Options & Futures

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  6. Options & Futures

    How To Manage Bull Put Option Spreads

    Learn how to halt options losses when the market moves quickly in an unfavorable direction.
  7. Options & Futures

    Out-Of-The-Money Put Time Spreads

    Learn about this low-risk, bearish options strategy used to speculate on major market declines.
  8. Options & Futures

    Option Strategies For A Down Market

    All investors should be aware that the best time to buy stocks is when the market is tanking, according to history.
  9. Options & Futures

    An Option Strategy for Trading Market Bottoms

    The reverse calendar spreads offers a low-risk trading setup that has profit potential in both directions.
  10. Options & Futures

    Pencil In Profits In Any Market With A Calendar Spread

    This options spread strategy provides many advantages over plain old puts and calls.

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center