Options Roll Up

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. What does it mean to roll a derivative contract?

    Find out more about derivative securities, how to roll forward a derivative contract and what it means when a derivative ... Read Answer >>
  2. How do I change my strike price once the trade has been placed already?

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  3. How are call options priced?

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