What is a Roll Down

Roll down refers to decreasing the strike price of an option position by closing the initial contract and opening a new contract for the same underlying asset at a lower strike price.

A roll down on a call option is a bearish strategy. This is the opposite of a "roll up" in which an investor simultaneously closes one position and opens another with a higher strike price. The converse would be true for put options where a roll down would be a bearish strategy.


Whether the existing positions are puts or calls, the procedure for rolling down is the same. Also, the trader executes both legs simultaneously, in order to reduce slippage or profit erosion due to a change in the price of the underlying asset.

When rolling calls, the new position will be more expensive than the old position, due to the lower strike. New put contracts will cost less in a roll down than the old put contracts. Depending on whether the old and new positions are long or short, the result of a roll up could be a debit or a credit to the account. How much depends on the price differential of the rolled options.

There are several reasons why a trader would roll down a position. They include avoiding exercise on short put positions. Or, it simply could be an expression of increased bearishness for a long put position. Remember that an in-the-money long put loses most of its time value, so rolling to an out-of-the money put would give the trader partial profits and possibly more bang for the buck, thanks to the lower price of the new puts.

A long call position might roll to a lower strike price if the underlying asset moved lower in price but the trader still believes it will eventually rise. In this way, the position remains in place with losses cut somewhat.

Traders should note that the spreads between the prices of options with different strikes vary. Some market conditions will not be as conducive for rolling down as others.

Other Types of Rolls

Traders can roll up a position in much the same way as they can roll down. This strategy simply involves closing the original position and opening a new position with the same underlying asset and expiration date, but at a higher price.

Traders can roll forward a position by keeping the strike price the same but extending to a longer expiration date. 

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."

Options traders use rolling strategies to respond to changing market conditions and to secure profits, limit losses, and manage risk.