Rollout effectiveness

asutrader

Newbie
2 0
Hello

Several "educators" teach rollout technique to "repair" or "fix" a selling PUT position that is or about to become ITM.
Mi goal is not to be assigned the underlaying. I don´t understand how the rollput helps to prevent assignment when the the PUT is ITM. As we know the buyer of the PUT that buys for hedging can issue an excercise at ANY moment on or before expiration. Rollout just extends the expiration but do nothing to fix the fact that the PUT is ITM and can be excersised at any time.
I´m missing something here?
 

Windlesham1

Well-known member
437 30
you ned to roll OTM that is the point- so you sacrifice future trading by rolling down and into the next month, and so on. Equity options are painful- it is really stupid to sell them naked as a stock can do ±6% in a day
 

wallstreetwarrior87

Senior member
2,059 385
Or as part of a "balanced" portfolio, only sell puts in a market that you actually want to be assinged! Then if price doesn't go in the money you simply get compensation for not being filled in the underlying ;) So many ways to utilise options, not wise to limit thinking in regards to an overall strategy. Too many focus on not losing, so much so they hedge this and that and ultimately end up restricting potential profits. Always accept risk first, then work from there. The only thing I would say is never sell naked calls, don't need to be Einstein to know the reason. You ALWAYS know downside risk to the downside in advance. Upside could be as Buzz says, " to infinity and beyond" lol
 

Windlesham1

Well-known member
437 30
never sell naked. Period. Again.....NEVER sell naked-selling puts in a stock is ok until you have to catch that falling knife and after 2 years of your stock at 30% of the buy price you close out. Maybe there are a few good safe stocks, and in the UK we are prevented from trading options on junk as only FTSE100 stocks are optionable. Index options have no early exercise, stocks do.
 
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