When will you tell me to roll?

My put credit spread is in-the-money! What should I do? When will you tell me to roll it or close it?

One of the best things about trading Options for Income spreads is that once the contract fills, you’ll almost always do nothing about it for weeks or months. Unlike with equity trades, credit spreads are protected by time value and beyond routine checking of your account, usually no action at all is needed on your part.

So if you’re a new options trader, and the underlying stock’s share price moves down just after you placed your first trade, relax. The secret to OFI’s high profits are that you regularly place small, low-risk trades. Since roughly 65% of OFI trades win on the first try, meaning that they expire "worthless", you’ll actually do nothing after placing most trades (except celebrate at expiration). The math works out so that if you follow the OFI program of new trades and rolls, you’ll have many more winners than losers, plus you’ll sleep better at night.

Please do not ask Jim on Stock Talk when he’s going to roll. 
He really is on top of everything all the time.

For the other 35% of OFI trades, however, expiration approaches with the stock price not behaving as hoped. If one or both legs of your two-legged spreads is on the wrong side of the stock price, and the trade’s protective time value has decayed, it becomes more likely that you’ll be assigned. (See also Am I going to get assigned?). To avoid assignment, the trade will need to be rolled to a later month to give it more time to work out positively. (See also Does this roll Alert apply to me? and Do I really need to do the rolls?)

About half of the 35% of trades that roll do ultimately win, and that’s how Jim’s roughly 82% win rate is achieved.

Usually the earliest that Jim will issue a Trade Alert to roll an in-the-money spread is three weeks prior to expiration. Starting at the three-week mark, he watches each trade like a hawk and will let you know when it’s time. As long as there is still some time value remaining, the risk of assignment is low and Jim will stay in the trade. No news is good news.

So don’t be alarmed if you’re near or at expiration day and Jim still hasn’t issued advice to roll the trade. He is watching many different factors and often the stock price moves exactly as hoped at the end.

Occasionally, Jim won’t tell you to roll until 2 p.m. ET on expiration day. If you will not be available at that time and you have an in-the-money trade expiring, you’ll want to close the trade early. See also What if I can’t monitor my trades?