[quote=flu]SK. Is the purpose of rolling the option contract because you make more money from the option premimum in the new options that expire much later versus the option premium left on the existing contract that you will close early?
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Yes. With option spreads as I’ve described, there’s a defined risk, but there’s also a smaller defined profit. For securities I continue to want to own, I roll it each month. If it gets too pricey, I move on to something else. (I wasn’t interested in AAPL at $110, but I’ve had positions on since it went to the low 90s) I’d be lying if I said I’m anything more than a novice. For me, closing trades with 50% of max profit is the goal. Or roll it to the next month if the price/premium is still attractive. Occasionally, trades will go my way and it’ll be more than that. When I’ve tried to eek out that last few bucks I’ve gotten into trouble, owning things I never wanted. Next month I’ll probably do some earnings trades, which I haven’t had much time to do the last 4 or 5 earnings seasons.
It’s taken a long time and very fortunately, not cost too much money, learning how to do it, lots of seminars and videos. I just finished an 18 month full time working gig and am just getting back into it. My wife probably averages 10 trades a day. (Her 1099 last year was 399 pages long in her trading account. It came in a box.) She might have 60 different open option trades at a time. She scans for things with high volatility, knows when to get in and out, and trades all kinds of things I don’t understand. She also trades futures (which I rarely do, other than SPX futures). She used to trade forex, but can’t anymore. Surprisingly, her total risk capital in her trading account is pretty low.
