Pictured here is a QQQ November 239 short put I filled for a 3.90 credit. (See Post Below). It's got 33 days to go, and was valued at 1.32 as of Friday close (i.e., it's in profit by 2.58 ($258)).
I would like to lock in that profit here, but stay in the play a little longer to bleed the last bit of extrinsic (1.32) out of it. Rolling out in time is one way to do that.
Looking at the November 27th expiry in table view (that's extending duration just one week), I'm basically looking for a strike that is paying greater than 1.32 in credit. The November 27th 230 is paying 1.07 (too little to roll for a credit), while the 240 is paying 1.71 (which is greater than 1.32). There are only five-wides available in the November 27th expiry, so I would roll the November 20th 239 to the November 27th 240 for a credit that is equal to 1.71 (what the November 27th 240 is paying) minus the price of the November 20th 239 (1.32) or .39.
This way, (a) I book a profit on the November 20th 239 of $258/contract; (b) increase my total credits received on the play by .39 (for a total of the 3.90 originally received plus .39 or 4.29); and (c) give myself a little more time to squeeze out what extrinsic remains in the short put, all while increasing net delta only slightly (from 7 delta for the November 20th 239 to 9 for the November 27th 240).
I would like to lock in that profit here, but stay in the play a little longer to bleed the last bit of extrinsic (1.32) out of it. Rolling out in time is one way to do that.
Looking at the November 27th expiry in table view (that's extending duration just one week), I'm basically looking for a strike that is paying greater than 1.32 in credit. The November 27th 230 is paying 1.07 (too little to roll for a credit), while the 240 is paying 1.71 (which is greater than 1.32). There are only five-wides available in the November 27th expiry, so I would roll the November 20th 239 to the November 27th 240 for a credit that is equal to 1.71 (what the November 27th 240 is paying) minus the price of the November 20th 239 (1.32) or .39.
This way, (a) I book a profit on the November 20th 239 of $258/contract; (b) increase my total credits received on the play by .39 (for a total of the 3.90 originally received plus .39 or 4.29); and (c) give myself a little more time to squeeze out what extrinsic remains in the short put, all while increasing net delta only slightly (from 7 delta for the November 20th 239 to 9 for the November 27th 240).
