Weekly Newsletter   Challenge account   Weekly Newsletter   

Why am I rolling options and not letting them assign?

A primary goal in my wheel strategy is to generate income, not to get assigned. So, simply, if I can roll the option trade away and adjust my strikes for credit, I roll. Of course, I still have to account for the eventuality that I get assigned. A stock may drop suddenly, I get an early assignment, or I won’t be nearby my computer to be able to adjust a trade that in the morning looked great but in the afternoon went south, for example.

That’s why I am creating my cash reserves to handle any assignments should they occur but I try to avoid them.

I have two main approaches to my portfolio wealth-building – one approach is to accumulate shares of the dividend growth stocks and then, the second approach is to trade the strangles around those positions. The shares generate income from dividends and on top of that, I receive premiums. And if the trade goes against me on the call side, my 100 shares cover it. If the put side goes against me, I have cash reserves to eventually buy another 100 shares of the stock. But if I can roll such strangle away in time and adjust the strikes up or down as needed and all that for a credit, I go for it and roll.

Leave a Reply

Your email address will not be published. Required fields are marked *