HOW TO ROLLOVER AN OPTIONS TRADE (ROLL AN OPTION FORWARD) | ROBINHOOD

hey what's going on youtube and welcome back to tech conversations as always i'm your host guillermo and as always i'm not a financial expert and a licensed professional if you plan on investing in the stock market please consult with one first and invest at your own risk so hope you're all having a great day so far this september 7th and it is labor day hopefully you guys have some time to enjoy your day with your friends your families uh now unfortunately with it being labor day today the stock markets are closed uh which you can see by this huge message here on robinhood markets close markets are closed today in observance of labor day now the stock market will be open tomorrow so hopefully you guys can all see some great gains now in today's video i want to talk about rolling over options this can be very useful in certain situations especially in the ones we saw last week with the bloodshed that occurred in the stock market and so i'll be explaining and showing some examples of how that works this is a question that i've received multiple times now before we begin uh just a quick reminder if you guys want to join my discord a link to it is in description below so you can see we have almost 2700 members in about two months uh great growing community a bunch of great traders on there and you know we enjoy answering all your questions all that fun stuff so again link to it in the description below if you'd like to join and also if you guys wouldn't mind hitting the like button down below and subscribing to this channel it really helps me out and it really helps my videos become more widespread on youtube so hopefully more individuals can come across them learn more about investing in the stock market and become better investors so thank you guys so much for your support and let's get right into this video so rolling over options works for you know if you're buying a put a call you're selling put calls spreads everything uh but i'll be let's just let's just imagine that we're going to sell put okay so we'll use tesla for today so let's imagine that last week at the beginning of the week i sold a put on tesla which expired uh with expiration date of last friday as well so september 4th so let's say on august 31st i sold a put for tesla that expired on september 4th okay and let's say i chose a 430 dollar strike price well that was fine right because on august 31st tesla was 460 480 uh you know it even almost got to 500 as you can see here uh but then as the week progressed right uh we had that bloodshed like i mentioned and tesla went well below 430 uh you know friday it kind of started to come back up but then you know as they got closer it continued to drop and then it dropped quite a bit after hours now let's imagine that you know i saw the put at 4 30 since the price was under 4 30 on expiration date i would have been forced to purchase 100 shares of tesla at 430 now let's say i don't i didn't want 100 shares of tesla at 430 dollars but i'm still bullish on tesla right i still think tesla will go back up in the future i just don't want to own 100 shares right now well what i could do is i could roll over that option right that expires on september 4th uh to a later date so that you know hopefully by then tesla goes back up above that strike price of 430 and then i'm not forced to actually own 100 shares of tesla okay so this is gonna be a very simple process i think a lot of people think it's more complicated than it sounds but honestly all that you're gonna have to do is close out of that position exit that trade that you have and then enter that exact same trade but at a later date okay so it's a combination of closing your trade and then entering the same exact trade at a later date so let me show you an example here so here's this put that i sold on crbp okay at a five dollar strike price so you can see this expires on september 18th okay now as you can see when i sold this put i received 95 cents per share and there's 100 shares so i received 95 for doing so however at the end of the day last week uh the market value for it had gone up to 105 dollars right meaning that my total return my net profit on this right now is uh minus ten dollars okay now let's imagine that for whatever reason i believe that you know on you know september 18th uh crbp might drop below five dollars but i don't want to actually buy a hundred shares right because remember if it drops below the strike price of five dollars i'm going to be forced to purchase 100 shares of crbp let's say i don't want that but let's say that next month in october i believe crbp will recover uh you know it'll go back up to whatever it is right now 934 ten dollars something like that well what i could do then is roll over this option and so again what i'm gonna first what i would first do right is i would close out of this trade and so since i sold a put remember to exit an options trade you do the exact same opposite thing so since i sold a put i would buy that exact same put same strike price same expiration date and that would exit me out of that trade and so luckily on robinhood desktop it already actually has that you know as you can see it has buy to close or sell to open so since i sold a put i would go to buy to close if i had bought a put i would go to sell to open and so to buy to close this as you can see i have one contract down here so i would go one here as you can see um the bid is one dollar ask is 110 and then in between which is the mark is 105. so if i wanted this to get filled as quickly as possible uh when buying i would you know do the ask and it would probably be filled immediately i usually i like to go somewhere in the middle or the mark which is 105 and that's actually what it recommends uh so i could uh potentially as you can see by uh buy to close this for a dollar and five cents per share or a hundred five dollars per the contract i would review the order and then i would submit it okay and so what this is going to do is basically buying a put here for crbp at a five dollar strike price on the exact same expiration date which would exit me out of this options contract now of course as you can see since i sold this for ninety five dollars as you can see here but now i'm buying it for a hundred and five dollars i would end up overall losing ten dollars okay but i can roll this over now so once i've done that and i'm and i've exited out of that options contract i would just do i would just go sell a put the exact same put right at a five dollar strike price but at a later date uh so again let's say for example you know i think september 18th crbp might drop below four i mean at that five dollar strike price let's say i think it's going to go to four but let's say that before october 16th i believe crbp will go back up to 10. so i could roll it over to that month instead right and exit and then again i would sell that put for the exact same strike price exact same expiration date and as you can see if i sold this now i'm going to receive uh you know i mean it really depends uh and what i try to fill it out here for but uh let's just say 145 dollars right so i could sell put again at a later date same exact put i had at a five dollar strike uh now i'm gonna receive 145. okay so so you can see there i lost ten dollars by closing out of that options trade but now i'm selling another put again and i'm making back 145 dollars right so i can now my net profit could potentially be 145 minus 10 which is 135 dollars and again you would do this if you believe or if you know for some reason uh the price goes well below your strike price and you don't want to own 100 shares or you think it's going to go below your strike price you can just roll it out to a later date so you can see its combination of closing the options trade first and then entering that exact same options trade but at a later date okay and so now i know a lot of you guys like to ask me how you close spreads uh and i know a lot of you guys use your app so this is from robinhood this is their like uh a bunch of uh great articles here that they have so one of them is how to close your spreads so if you're on your app which again i know a lot of you guys use your app you can just tap the option on your home screen you can tap trade and then you can tap close to exit out of that options trade and then again you would create that exact same spread but at a later date at a later week at a later month whatever it is that you want but of course there's two things you should keep in mind here right first one being the credit debit right uh it wouldn't make sense for me to roll this over if you know the amount of credit i can receive uh is less than how much i'm you know paying to exit out of the options contract uh at least most of the time it wouldn't make sense right the other thing you got to consider too is is there a better use of capital somewhere else right because let's say for example i solely put on tesla last week like my first example but you know i believe that in the future tesla's going to continue to drop it wouldn't make sense for me to roll over that option because if i sold another put for you know in a week or a month but i think tesla's going to drop then i'm just going to continue to lose money right because i continue to sell puts but the price continues to drop below my strikes uh you know that's not worth it right so sometimes you might just have to exit your options contract and you know there might be a better place to use your capital right again that's you know you're doing your due diligence and figuring out you know whether it makes sense to roll it over to an another date but uh it's literally that simple hopefully all this makes sense but again if you guys have any questions feel free to let me know in the comments section below i try to answer as many questions as i can again if you guys want to join my discord link to it is in the description below also if you any of you plan on using robinhood in the future feel free to use my referral link which is in the description below as well if you sign up using my referral link both you and i will receive one free stock which is basically free money for both of us so let's help each other out guys and as always hope you enjoyed the video have a great labor day i'll see you guys next time

Channel: TechConversations

Views: 32,195

Rating: 4.632 out of 5

Keywords: roll an option forward, roll an option, roll an option position, roll an option on robinhood, rolling an options trade, rolling an option on robinhood, rolling an option, rolling an option forward, rolling an option contract, how to roll an option in robinhood, roll options, roll option strategy, roll options on robinhood, rollover options, rollover options trading, rollover options robinhood, rollover put option, rollover option strategy, how to rollover call options, rolling

Id: ViUPHeDQcu4

Length: 11min 1sec (661 seconds)

Published: Mon Sep 07 2020