Your rationale makes sense for a seller of naked put. However, often a seller's appetite to take a long position in the underlying equity quickly disappears once the price of the stock falls below the put's exercise price. So, if you are certain you not only want to own the stock, but also at the exercise price less the premium earned on your short put position, then your strategy to hold to expiration makes sense.
Since we're talking naked puts rather than covered calls, I would add that rolling over puts makes good sense when the premium falls to a small amount without much likelihood (price movement & more importantly time) of the premium quickly shooting back up. In short, when the price of the stock moves in a favorable direction (either up or flat) & the premium on the short put position falls below $.20 to as little $.05, & there's a month or so to expiration, it make sense either to close out that position to free up collateral, or roll it up to a put of the same expiration, but of a higher strike price below which you think the stock will trade in order to "squeeze" more money out of the collateral required by the put position.
If there are several months to expiration, & I have a short position (either put or call) that falls below $.20, I always consider closing that position, locking in my profit, with the expectation the stock will bounce & I can re-establish the same short option position @ a higher premium.
With respect to rolling over written call positions, I only do so when stock price has moved against me, (I don't wish to sell my shares@ the strike @ expiration) and I roll out my position to a later expiration, believing the stock will retrace where I might close my position, or hold believing the stock will never hit the exercise price @ the later expiration.
I rarely, if at all, roll out short call positions where the stock has moved in my favor (flat or down), to establish a more aggressive (lower) exercise price. Reason 1 is the position doesn't require collateral other than a long term investment position in the underlying stock. [I don't take a long position to simply take a covered call position. I just write covered calls on long held positions in my account.] Reason 2, if I wish to establish a more aggressive position, I can simply write calls on other uncovered shares.
Bottom line, rolling over positions does not make sense in all instances, only in some. Some times it makes sense to close the position; other times it makes sense to hold to expiration and allow to expire out-of-the money, or in your case, in-the-money, particularly if you wish to be long the stock.
Last month I allowed QCOM Mar 52.5 puts I wrote 2 weeks before expiration to expire in the money. A few days after assignment, I wrote May 55 calls on those shares after the stock rallied from around 51.50 to just south of 54. My view is like yours. I'm content to hold the shares. If they get assigned in May, I made a nice profit; if they don't, I will be writing another call position going forward while receiving a decent dividend. |
