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Strategies & Market Trends : Options
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To: Jeffry K. Smith who wrote (618)1/4/2000 8:24:00 AM
From: Poet  Read Replies (1) of 8096
 
Jeff,

Those are great questions on rolling up and out.
Defining terms:
Rolling out: Using calls as an example, I purchase 5 May calls on GMST and GMST moves up 20 points. My calls yield a $5k profit (assuming a .5 delta). I sell these calls when my profit level is reached and buy GMST August calls AT THE SAME STRIKE PRICE (buying further out= rolling out), which are more expensive because they contain more time premium and are deeper in the money. This move keeps you in the game, optionwise, and reduces your risk.

Rolling up: I did this yesterday with some QCOM Feb 112.5's I've been holding. These calls are very DIM and have given me wonderful profits. I wanted to take some profit off the table, as well as "cast a wider net" on QCOM, as I'm very bullish through earnings at the end of January. I sold 25 Feb 112.5's, at $71, and bought 50 Feb 200's at $21 5/8.

You can also roll both up and out at the same time as well.
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