Rollin’, Rollin’, Rollin’ on a Contract.

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This is not investment advice and is intended for entertainment purposes only

Rollin’, Rollin’, Rollin’ on a Contract.

Today, we're diving into the gold mine of rolling covered calls.

It's like playing musical chairs with your investments, but instead of chairs, we have stocks and options.

Let’s get this party started!

What's Rolling a Covered Call?

There are two primary scenarios:

1. Imagine you sold a covered call, and now it's like that awkward text message you regret ever sending.

   What can you do?!

   Roll baby, roll.

   Basically, you are sending a follow-up text to fix the first one. In the stock market, this means you're buying back the old option and selling a new one. It's like asking for a do-over in a game of Monopoly.

2. You sold a Covered Call and now have accrued a majority of the value of the contract because it is so out-of-the-money and highly unlikely to get assigned.

   You can go ahead and roll the contract and collect a premium on a newly opened position for a net credit!

(Option 2 is a way better scenario than 1 lol)

Okay, So Why Roll?

1. Avoid being sold assigned

2. You’ve already retained the majority of the value from the original contract you wrote

The concept of rolling was primarily invented as a protective function. The most widely known use case for rolling a covered call is to avoid having your stock called away (a.k.a. "the exercise"). It's like playing fetch with your dog, but you don't actually want to give up the ball. Rolling lets you keep the game going and potentially rake in more premiums.

Ka-ching!

Timing is Key

Timing is everything, and with rolling, it's like trying to nail the punchline in a joke.

Roll too early, and you might miss out on extra income.

The trick is to find that sweet spot where you are retaining as much value from your original contract while also mitigating assignment risk: All for a Net Credit.

Let's not forget, that rolling covered calls isn't always smooth sailing. There's risk involved.

Always have a plan and an understanding of what you're getting into.

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Meme of the Week

In honor of Bitcoin Spot ETFs getting approved this week, here is a banger from @dougboneparth