Article
How to Roll Options in the Wheel Strategy: When, Why, and How (2025 Guide)
Master rolling options in the wheel strategy. Learn when to roll puts and calls for credit, how to avoid assignment, and advanced techniques to maximize profits.
Table of Contents
What is Rolling & Why It Matters
Rolling is the art of closing your existing option position and simultaneously opening a new one—usually to extend time, adjust your strike price, or both. It's one of the most powerful tools in the wheel strategy arsenal, yet most beginners don't understand when or how to use it.
Here's why rolling matters: Without rolling, your only choices when a trade goes against you are (1) take assignment or (2) close for a loss. Rolling gives you a third option: extend the position, collect more premium, and give the trade more time to work out.
Done correctly, rolling can:
- Avoid unwanted assignments when you no longer want to own shares
- Reduce your cost basis by collecting additional premium
- Turn losing trades into winners by giving them more time
- Lock in profits early while keeping the position active
- Adjust to changing market conditions without closing the entire position
Simple Definition
Rolling = Close your current option (buy it back) + Open a new option (sell a new contract) in a single transaction. The new option typically has a later expiration date and may have a different strike price.
Rolling a Put
Example: You sold a $50 put expiring Friday. It's now Monday, stock is at $48, put is ITM.
Roll: Buy back the $50 put for $250, sell a new $48 put expiring next Friday for $280. Net credit: $30. You've extended the position, lowered your strike, and collected more premium.
Rolling a Call
Example: You sold a $55 call expiring Friday. It's Wednesday, stock rallied to $58, you don't want shares called away.
Roll: Buy back the $55 call for $350, sell a new $60 call expiring in 2 weeks for $420. Net credit: $70. You avoided assignment and raised your strike.
When to Roll Cash-Secured Puts
Rolling puts is common in the wheel strategy. Here are the three main scenarios where rolling makes sense:
Scenario 1: Put Going ITM, Stock Still Desirable
Situation: Your put is approaching or is in-the-money (ITM), expiration is near, but you still want to own the stock—just not yet. Maybe you don't have the cash ready, or you want to collect more premium first.
Example:
- Stock: AAPL at $168
- Your position: Short $170 put expiring in 3 days
- Put value: $2.50 (ITM)
- Analysis: Stock hit temporary support at $168, likely to bounce back above $170 given strong earnings
Roll Decision:
- Buy to close: $170 put @ $2.50 debit
- Sell to open: $165 put (2 weeks out) @ $3.20 credit
- Net credit: $0.70 × 100 = $70
Result: You avoided assignment this week, lowered your strike (now getting stock at $165 instead of $170 if assigned), collected $70 more premium, and gave AAPL time to recover.
When to Use This Roll
- ✓ Stock fundamentals still strong
- ✓ You still want to own shares, just not this expiration
- ✓ You can roll for a net credit
- ✓ Short-term dip looks temporary
Scenario 2: Put Deep ITM, Reduce Cost Basis
Situation: Your put is significantly ITM and assignment looks inevitable. Instead of taking assignment immediately, roll to collect more premium and lower your eventual cost basis.
Example:
- Stock: JPM at $135 (dropped from $145 on banking sector fears)
- Your position: Short $145 put expiring Friday
- Put value: $10.50 (deep ITM)
- Analysis: Assignment is likely, but you want JPM long-term and believe sector fears are overblown
Roll Decision:
- Buy to close: $145 put @ $10.50 debit
- Sell to open: $140 put (3 weeks out) @ $12.00 credit
- Net credit: $1.50 × 100 = $150
Cost Basis Impact:
If assigned at $140: Your cost basis = $140 - $1.50 (roll credit) - original premium = much lower effective entry
Plus, if JPM recovers above $140 before expiration, you keep all premium and no assignment. Win-win.
When to Use This Roll
- ✓ Assignment is likely/inevitable
- ✓ You're okay owning shares at the new lower strike
- ✓ The roll generates significant credit (reduces your basis meaningfully)
- ✓ Stock isn't in free-fall (temporary correction vs structural decline)
Scenario 3: Put OTM, Extend Premium Collection
Situation: Your put is out-of-the-money (OTM) and will likely expire worthless. Instead of waiting for expiration and starting over, roll to the next week/month to lock in gains and keep premium income flowing.
Example:
- Stock: MSFT at $420
- Your position: Short $400 put expiring this Friday (2 days away)
- Put value: $0.05 (almost worthless)
- Analysis: Put will expire worthless, but instead of waiting, roll now to capture next week's premium
Roll Decision:
- Buy to close: $400 put @ $0.05 debit
- Sell to open: $405 put (next Friday) @ $2.80 credit
- Net credit: $2.75 × 100 = $275
Result: You closed the current trade 2 days early (locking in 99% of max profit), immediately opened next week's position, and saved 2 days of theta decay sitting around doing nothing.
Pro Tip: The "21 DTE Rule"
Many experienced traders roll winning puts when they hit 50% profit OR when there are 21 days to expiration (DTE), whichever comes first. This maximizes capital efficiency by not waiting for the last $0.05 of premium while the stock could move against you.
When to Roll Covered Calls
Rolling covered calls serves different purposes than rolling puts. You're protecting upside, managing cost basis, and avoiding early assignment.
Scenario 1: Don't Want Shares Called Away
Situation: Your covered call is ITM due to a strong rally. You still believe in the stock long-term and don't want to lose your shares. Roll up and out to avoid assignment.
Example:
- Stock: AAPL at $185 (you own 100 shares, cost basis $165)
- Your position: Short $180 call expiring this Friday
- Call value: $5.50 (deep ITM, shares will be called away at $180)
- Problem: You don't want to sell at $180—AAPL is breaking out, could hit $200
Roll Decision:
- Buy to close: $180 call @ $5.50 debit
- Sell to open: $190 call (2 weeks out) @ $6.20 credit
- Net credit: $0.70 × 100 = $70
Result: You kept your shares, raised your strike from $180 to $190 (+$10 more profit if called), collected $70, and gave yourself 2 more weeks. If AAPL hits $190, you profit $25/share instead of $15.
⚠️ Warning: Don't Get Greedy
Rolling calls to avoid assignment works great in bull markets, but don't roll indefinitely. If you're constantly rolling to avoid selling, you're fighting the strategy. Set a max price target (e.g., "I'll definitely sell at $200") and let shares go when you hit it.
Scenario 2: Roll Up and Out for Higher Strike
Situation: Your call is approaching ITM, but you're okay selling shares—just want a higher strike to maximize profit.
Example:
- Stock: BAC at $37 (you own 100 shares, cost basis $32)
- Your position: Short $36 call expiring in 1 week
- Call value: $1.50
- Thought: "I'm happy to sell, but $38 would be better than $36"
Roll Decision:
- Buy to close: $36 call @ $1.50 debit
- Sell to open: $38 call (2 weeks out) @ $2.10 credit
- Net credit: $0.60 × 100 = $60
Profit Comparison:
If shares called at $36: $4/share profit + original put/call premiums
If shares called at $38 (after roll): $6/share profit + $0.60 extra + original premiums = +$260 more profit
Scenario 3: Avoid Early Assignment (Dividend Risk)
Situation: Your ITM call is approaching ex-dividend date. Call holders may exercise early to capture the dividend. Roll to avoid early assignment.
Example:
- Stock: JNJ at $162 (you own 100 shares)
- Your position: Short $160 call expiring in 2 weeks
- Call value: $3.00
- Problem: JNJ ex-dividend date is tomorrow ($0.50 dividend)
- Risk: Call holder exercises early to get dividend, you lose shares AND dividend
Roll Decision:
- Buy to close: $160 call @ $3.00 debit
- Sell to open: $165 call (expiring AFTER ex-div date) @ $3.80 credit
- Net credit: $0.80 × 100 = $80
Result: You kept shares through ex-dividend, collected the $50 dividend, raised your strike to $165, and collected $80 in roll credit. Total gain: $130 vs getting assigned early.
Dividend Timing Rule
Always check ex-dividend dates for your holdings. If you have an ITM call within 1-2 weeks of ex-div, consider rolling it past the ex-date. The dividend income often exceeds the cost of rolling.
The Golden Rule: Roll for Credit
Rule #1: Always Collect Net Credit When Rolling
The premium you collect from the new option must be greater than what you pay to close the old option. If you can't roll for a credit, don't roll—take assignment or close the position.
Why Credit Matters
Rolling for a credit means:
- You're reducing your cost basis with every roll, making eventual profit more likely
- You're getting paid to extend time rather than paying for time (like buying options)
- You maintain positive expectancy—even if the stock doesn't recover, you've collected more premium
- You're not throwing good money after bad—a debit roll is often a sign the position is broken
How to Calculate Roll Credit
Step-by-Step:
- Check the cost to close your current option (buy back):
Example: Your $50 put is trading at $2.80 bid/ask. Closing cost = $2.80 × 100 = $280
- Check the premium for the new option you'll sell:
Example: New $48 put (2 weeks out) trading at $3.50 bid/ask. Opening credit = $3.50 × 100 = $350
- Calculate net credit:
Net credit = New option premium - Close cost = $350 - $280 = $70 credit
- Verify it's worth it:
Is $70 credit worth extending 2 weeks and lowering strike to $48? Usually yes.
Quick Mental Math Shortcut:
If the new option's bid is higher than the old option's ask, you'll get a credit. Example: Closing old at $2.80 ask, opening new at $3.50 bid → guaranteed credit of at least $0.70.
✓ Good Roll (Credit)
Close: $55 put @ $4.20 debit
Open: $52 put (3 weeks) @ $5.10 credit
Net: $0.90 credit ($90)
This roll pays you to extend time and lower your strike. Do it.
✗ Bad Roll (Debit)
Close: $60 put @ $8.50 debit
Open: $55 put (2 weeks) @ $7.20 credit
Net: $1.30 DEBIT (-$130)
You're paying $130 to kick the can down the road. This is a sign the trade is broken—better to close or take assignment.
When NOT to Roll
Rolling isn't always the right choice. Here's when to take assignment, close for a loss, or let the option expire:
1. You Can't Roll for a Credit
If every roll scenario results in a net debit, it's a sign that:
- • IV has collapsed (no one wants to sell you premium)
- • The stock is in free-fall (market pricing in continued decline)
- • Time value has evaporated
Don't pay to extend a losing trade. Either take assignment (if you want the stock) or close the position and move on.
2. Fundamentals Have Changed
If something material has changed about the company since you opened the position:
- • Earnings disaster (revenue collapse, guidance slashed)
- • Accounting scandal / SEC investigation
- • CEO resignation / major executive departures
- • Product recall / regulatory action
- • Bankruptcy warning / debt crisis
Close immediately. Don't roll a fundamentally broken stock. Take the loss and preserve capital.
3. You're Past Your Loss Limit
If you've rolled 2-3 times already and the position is still underwater by 25%+, stop. You're in "sunk cost fallacy" territory.
Example of "Dead Money":
Trader sells $100 puts on XYZ. Stock drops to $80. They roll to $95 puts. Stock drops to $70. Roll again to $90 puts. Stock drops to $60.
After 3 rolls, they've collected maybe $500 in total credit but are sitting on a position that would require $4,000 capital with $2,000 unrealized loss. That capital could have been redeployed 3 months ago into profitable trades.
Set a rule: "Max 2 rolls per position" or "Max 25% loss". When you hit it, cut the position.
4. Better Opportunities Exist
Opportunity cost is real. If you're tying up $15,000 in a mediocre position that generates $50/week in roll credits, but there's a high-quality stock offering $200/week in fresh premiums, close the bad position and redeploy.
Don't let loyalty to a losing trade prevent you from taking advantage of better opportunities. Capital has an opportunity cost.
5. Assignment is Actually Good
Sometimes assignment is the right outcome:
- • Stock hit your target entry price (your original plan)
- • Premium collected is already significant (cost basis is great)
- • You want to start selling covered calls
- • Dividend is coming and you want to collect it
The wheel strategy EXPECTS assignment. Don't roll just to avoid assignment if assignment is part of your plan.
Step-by-Step Rolling Process (All Brokers)
The mechanics of rolling vary slightly by broker, but the concept is universal: close the old, open the new, ideally in a single order.
Method 1: Single "Roll" Order (Preferred)
Most modern brokers (TD Ameritrade, Interactive Brokers, Schwab) have a dedicated "Roll" button/function.
-
Navigate to your open options position
Find the short put or call you want to roll
-
Click "Roll" or "Roll Option"
The broker will show you available expirations and strikes for the new leg
-
Select new expiration date
Usually 1-4 weeks out, sometimes same strike or different
-
Select new strike price
Same, higher, or lower depending on your goal
-
Review the net credit/debit
The order ticket will show: "Close $50 put @ $2.80, Open $48 put @ $3.50, Net Credit: $0.70"
-
Set limit order at net credit
Don't use market orders! Set a limit at the credit you calculated
-
Submit and monitor
If it doesn't fill quickly, adjust your limit by $0.05-0.10 increments
Advantage of Single Roll Order:
Both legs execute simultaneously. You won't get stuck with one leg filled and the other not, which could leave you with unwanted exposure.
Method 2: Manual Two-Leg Order (If No "Roll" Button)
Robinhood and some mobile apps don't have a dedicated roll function. You'll need to create a spread order manually.
- Open "Multi-Leg Options" or "Spread" order form
-
Leg 1: Buy to Close
Select your existing short put/call, choose "Buy to Close"
-
Leg 2: Sell to Open
Add a new leg, select new strike + expiration, choose "Sell to Open"
-
Order Type: Net Credit Limit
Enter the net credit you want (e.g., $0.70). The broker will try to fill both legs at that net price.
- Review and submit
⚠️ Risk with Manual Method:
If one leg fills before the other, you could be naked short or long an option temporarily. Use limit orders and avoid doing this during high volatility (e.g., first 30 min after market open).
Real Trading Examples
Example 1: Rolling a Losing Put Out and Down
Initial Trade:
- Stock: NVDA @ $520
- Action: Sold $500 put, 1 week DTE
- Premium: $6.50 ($650)
- Collateral: $50,000
What Happened:
Semiconductor sector selloff. NVDA dropped to $485 in 3 days. Your $500 put is now worth $17.00 (deep ITM). Assignment looks certain.
Analysis:
You still want NVDA long-term (AI story intact), but not at $500. Prefer to get it at $480 or lower. Roll to extend time and lower strike.
Roll Execution:
Close: $500 put @ $17.00 debit
Open: $480 put, 3 weeks DTE @ $19.50 credit
Net credit: $2.50 × 100 = $250
Outcome Scenarios:
Scenario A: NVDA recovers to $495
→ $480 put expires worthless, you keep $650 + $250 = $900 total. No assignment.
Scenario B: NVDA drops to $470
→ Assigned at $480. Cost basis = $480 - $6.50 - $2.50 = $471/share. Stock is at $470, so only -$1/share unrealized loss (vs -$15/share if you'd been assigned at $500)
Result: Rolling saved you from a bad entry, collected more premium, and gave NVDA time to stabilize.
Example 2: Rolling a Covered Call Up and Out
Initial Trade:
- Stock: JPM @ $145 (own 100 shares, basis $138)
- Action: Sold $150 call, 1 week DTE
- Premium: $2.80 ($280)
What Happened:
Banking sector rally on positive Fed comments. JPM surged to $154 in 2 days. Your $150 call is ITM by $4. Shares will be called away Friday.
Analysis:
You believe JPM can hit $160+ in the next month (earnings coming up, bullish sentiment). Don't want to sell at $150. Roll up and out to capture more upside.
Roll Execution:
Close: $150 call @ $5.00 debit
Open: $158 call, 3 weeks DTE @ $6.20 credit
Net credit: $1.20 × 100 = $120
Profit Comparison:
If called at $150:
Stock gain: ($150-$138) × 100 = $1,200
Call premium: $280
Total: $1,480
If called at $158 (after roll):
Stock gain: ($158-$138) × 100 = $2,000
Call premiums: $280 + $120 = $400
Total: $2,400
Gain from rolling: +$920 (62% more profit!)
Advanced Rolling Strategies
1. The "Ladder Down" Roll
When a stock is in a sustained downtrend, instead of rolling to the same or lower strike all at once, ladder down in smaller increments over multiple rolls.
Example: Stock at $80, you have a $100 put ITM. Instead of rolling to $80 put immediately:
- Week 1: Roll to $95 put, collect $X credit
- Week 2: Roll to $90 put, collect $Y credit
- Week 3: Roll to $85 put, collect $Z credit
Benefit: Collect more total premium through multiple rolls, give stock time to stabilize between rolls, and avoid one big debit roll.
2. Rolling to Different Expirations (Diagonal Roll)
Don't always roll to the next weekly expiration. Sometimes rolling to monthlies (30-45 DTE) generates more credit per day.
Comparison:
Roll to next week (7 DTE): $0.80 credit = $0.114/day
Roll to 30 DTE: $3.50 credit = $0.117/day
Monthly roll gives better credit/day AND more time for stock to recover
3. The "Free Roll" (50% Rule)
When your sold option has decayed to 50% of max profit, buy it back and roll to next expiration. This "free roll" locks in most gains while immediately deploying into next period.
Example: Sold $50 put for $2.00 ($200). It's now worth $1.00.
You've captured 50% profit ($100). Close for $100, sell next week's $50 put for $2.10 ($210).
Net: You keep $100 from first trade + $210 from new trade. More efficient than waiting for expiration.
Frequently Asked Questions
How many times can I roll the same position?
Answer: There's no hard limit, but set a personal maximum (e.g., 2-3 rolls). If you've rolled more than 3 times and the position is still underwater, it's likely a losing trade. Stop throwing good money after bad and close the position or take assignment.
What if I can't get a credit when rolling?
Answer: Don't roll for a debit. Your options are: (1) Take assignment if you want the stock, (2) Close the position for a loss, or (3) Wait and hope the stock recovers before expiration. Rolling for a debit is paying to extend a losing trade, which rarely works out.
Should I roll up/down/same strike?
Answer: It depends on your goal:
- Roll up (calls): When you want more profit if called away
- Roll down (puts): When you want a better entry price if assigned
- Same strike: When you like the current strike, just need more time
Does rolling affect my cost basis?
Answer: Yes! Every credit you collect from rolling reduces your cost basis. Example: Assigned at $50, rolled 3 times collecting $1.50 total in credits. Your adjusted cost basis is $48.50, not $50. This is why tracking tools like Njord Options are essential—manual tracking gets messy fast.
What's the best expiration to roll to?
Answer: Generally, 1-4 weeks out for weeklies, or 30-45 DTE for monthlies. The sweet spot is where you maximize credit per day of theta decay. Too short (3-5 days) and you don't get much credit. Too long (60+ days) and you're tying up capital for minimal extra premium. Test both and see what works for your style.
Track Every Roll, Know Your True Cost Basis
Stop losing track of your adjusted basis after rolling. Njord Options automatically calculates your cost basis through unlimited rolls, showing you exactly where you stand on every position.
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