Rolling Options: Overview, Types, Example, Benefits & Risks

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Written by Arjun Remesh | Reviewed by Sunder Subramaniam | Updated on 17 July 2025

Rolling options is the practice of closing an existing options position and simultaneously opening a new one to adjust the trade’s risk, time frame, or potential reward. Rolling options is central to active options trading and is favored by retail and institutional investors for its flexibility.

Instead of accepting whatever outcome the market delivers at expiry, rolling lets you adapt positions to changing conditions. It’s especially used in Indian markets for Nifty, Bank Nifty, and top stocks where liquidity is high and assignment risk is real.

Common rolling scenarios include covered calls, cash-secured puts, and vertical spreads.

For example, if a covered call is about to be assigned due to a rally, you can roll the call to a higher strike or further expiry, continuing to earn premium.

What Does Rolling an Option Mean?

Rolling an option means closing your current contract and immediately opening another with a different strike, expiry, or both, as a single, planned transaction. This is done either to extend the trade’s time frame, adjust its risk profile, or respond to new market information.

Rolling is not just buying a new option after expiry—it’s a strategic move to actively manage open positions.

You close the existing position (buy or sell to close) and simultaneously open a new contract (buy or sell to open) when you roll.

For instance, you might roll your position to a higher strike or a further expiry if you sold a Nifty call at Rs. 21,500 and the index rallies close to this level.

This action avoids assignment, lets you collect more premium, or gives your trade more time to work. Rolling can be applied to single-leg trades (like naked puts), covered calls, or complex spreads.

Brokers like Zerodha, Angel One, and ICICI Direct allow you to execute rolling as a spread order, which is faster and reduces execution risk. Rolling’s main goal is to stay in control of your trade, adapting to new realities instead of being forced out by expiry or assignment.

Why Do Traders Roll Options?

Traders roll options to adapt to changing market conditions, avoid assignment, protect profits, extend time, or adjust their risk exposure.

Rolling is one of the most versatile tools in options trading, giving traders control and flexibility.

• Avoid Assignment: Rolling helps prevent unwanted stock delivery or purchase when an option is in the money close to expiry.
• Lock In Profits: If a trade is in profit but you want to continue the strategy, rolling allows you to close the winning position and open a new one, often at a better strike or longer expiry.
• Extend Duration: By rolling out to a later expiry, you give your trade more time to become profitable, especially if the stock is moving slowly.
• Adjust Strike: Rolling up or down the strike price helps align with your latest market outlook, increasing or decreasing risk and reward.
• Rescue Losing Trades: If your trade is in a losing position, rolling can help reduce potential loss or give the trade another chance to recover.

Many also roll to adapt to changing market trends or volatility spikes. Rolling is not just about avoiding loss—it’s about active risk and profit management.

The key is to roll with a clear objective and to weigh the costs and benefits before executing.

When Should You Roll an Option Position?

The best time to roll an option is when expiry is near, your option is in the money, or changing market conditions threaten your trade’s success. Rolling too late increases risk and reduces flexibility, while rolling too early can leave potential profits on the table.

Situations to consider rolling

• Approaching Expiry: Most traders roll 5–10 days before expiry. The closer to expiry, the higher the assignment risk and the less time premium left.
• In-the-Money Options: If your option is deep in the money, the risk of assignment is high. Rolling avoids being assigned and keeps your strategy alive.
• Volatility Spikes or Price Moves: If the market suddenly moves against your position, rolling allows you to adjust strikes or expiries to better match the new situation.
• Near Breakeven on Spreads: If a spread is close to breakeven but needs more time to be profitable, rolling out can give it a second chance.
• Best Timing Practices: Industry best practice is to roll before the last week of expiry, as liquidity drops and bid/ask spreads widen in the final days.

Rolling is about being proactive, not reactive, and aligning your trade management with market realities.

What Are the Types of Rolling in Options?

There are four main types of rolling in options: rolling out, rolling up or down, rolling up and out/down and out, and diagonal rolls.

Each serves a different purpose and is chosen based on your market outlook and trade objectives.

Rolling Out involves closing your current option and opening a new one with the same strike but later expiry. This is common when your view hasn’t changed, but you need more time.

Rolling Up or Down means you change the strike price. Go up for more bullish exposure, down for more bearish, often in response to a strong move in the underlying.

Rolling Up and Out / Down and Out combines both, letting you move to a new strike and expiry date. This is best when both your time frame and risk-reward view have shifted.

Diagonal Rolls are advanced, involving both a new strike and new expiry, creating a “diagonal” spread. It’s used when you want to optimize both time decay and price exposure in one step.

How to Roll an Option?

Rolling an option is a four-step process: evaluate your position, choose your new strike/expiry, execute the roll as a spread, and review the new trade’s risk and reward.

Proper execution is crucial for maximizing the effectiveness of the roll.

1. Evaluate the Current Position: Check profit/loss, option Greeks, and risk level. Decide if rolling is necessary and strategic.
2. Choose the New Strike/Expiry: Based on your market view, select the new strike price and/or expiry that aligns with your objectives.
3. Execute as a Spread Order: Place a simultaneous order to close the old and open the new option. This reduces slippage and ensures both trades fill together.
4. Review New Position: After the roll, recalculate your breakeven, Greeks, and risk. Make sure the new trade fits your overall plan.

If you sold a Reliance 2,400 call (expiring this week) and want to avoid assignment, you might buy it back and sell a 2,450 call (expiring next month).

This roll both increases your strike and extends your duration. Always check liquidity and commissions before executing a roll, as costs can impact overall returns.

What are the Examples of Rolling Options

Rolling options is most often used in covered calls, cash-secured puts, and vertical spreads—each with its own best practices and goals.

Here are three detailed examples.

Rolling a Covered Call

Suppose you own 100 shares of HDFC Bank and sold a call at Rs. 1,800, collecting Rs. 20 premium.

If HDFC rallies to Rs. 1,820, your call is in the money, and you risk assignment.

You roll by buying back the Rs. 1,800 call and selling a new call at Rs. 1,850, perhaps with a later expiry and Rs. 15 premium.

This avoids assignment, locks in part of your profit, and gives the trade more room to run.

Rolling a Cash-Secured Put

You’ve sold a TCS put at Rs. 3,000, collecting Rs. 25.

TCS drops to Rs. 2,980 as expiry nears, so assignment risk is high.

Roll down and out by buying back the Rs. 3,000 put and selling a Rs. 2,950 put (next month’s expiry) for Rs. 30.

This reduces your risk of being assigned at a higher strike and brings in more premium.

Rolling a Vertical Spread

You are long a Nifty 21,000 call, short a 21,500 call (bull call spread), and the index stalls at 21,200.

Near expiry, the spread is near breakeven.

You roll the entire spread out to next month, keeping the same strikes.

This gives the trade more time to work without closing your bullish position.

What Are the Benefits of Rolling an Option Position?

Rolling an option position delivers benefits like avoiding assignment, extending trade duration, locking in profits, and continuously adapting risk/reward as market conditions change.

• Avoid Unwanted Assignment: By rolling, you sidestep forced delivery or purchase of stock when options go deep in the money.
• Lock In Gains: Rolling allows you to realize partial profits while continuing to participate in further moves.
• Extend Time in the Market: More time means more chances for a trade to turn profitable, especially during choppy periods.
• Increase Premium Income: Repeated rolling, especially with covered calls and puts, can add 15–25% to annualized returns in a range-bound market.
• Adjust to Market View: Rolling up or down lets you fine-tune risk and potential reward as your outlook changes.
• Smooths the Equity Curve: Regular rolling helps reduce the volatility of your P&L by managing risk more proactively.
• Greater Flexibility: Rolling offers continuous trade management, letting you “stay in the game” rather than closing out.

The real value of rolling is in its ability to let you adapt, profit, and control risk in fast-changing markets.

What Are the Risks and Costs of Rolling Options?

Rolling options involves real risks and costs, including extra commissions, wider spreads, slippage, and the chance of turning a paper loss into a realized one.

• Higher Commissions: Each roll is two trades (close one, open another), doubling your transaction fees.
• Wider Bid/Ask Spreads: Some strikes or expiries have poor liquidity, leading to unfavorable prices.
• Slippage: Fast-moving markets or illiquid contracts often result in worse fills than expected.
• Locking in Losses: Rolling a losing position crystallizes the loss, making it real instead of just on paper.
• Potential for Worse Risk/Reward: If you roll into a poor setup, you might have less upside or more downside than before.
• Active Management Required: Rolling is not passive; it demands attention, speed, and market awareness.
• Opportunity Cost: Frequent rolling can lead to churning, eating up profits through commissions and slippage.

Rolling should be part of a plan, not a reflex to avoid loss, and should always be compared to the cost of closing the trade outright.