Does this roll Alert apply to me? What do I do?

I just received a Trade Alert to roll. What should I do?

Note for new traders: if you didn’t place the initial trade back when Jim first recommended it, you can ignore any subsequent Trade Alerts to “roll” that trade.

Note for experienced traders: if you didn’t place the initial trade, you may choose to place the second half of a roll as a new trade if it meets these criteria: (1) out-of-the-money option strikes; (2) minimum $1.00 net credit; (3) minimum rate of return of 20%, defined as (net credit received)/(spread width – net credit received)]; and (4) 80% or higher stock seasonality.

The primary goal for each put credit spread trade is that it expire worthless, meaning that the underlying stock’s price is at or above your short-leg’s strike price at expiration. That successful conclusion allows you to immediately redeploy your winnings into new trades. But for around 35% of OFI trades, the initial trade needs more time to be successful. When that happens, Jim issues a Trade Alert to roll. 

Although it’s possible to execute these rolls as two separate steps (first close your initial two-leg trade, then quickly open your new one- or two-leg trade), Jim prefers that you roll by executing all legs simultaneously. Not only does that ensure a complete transaction with a known net price, but your broker will charge you just one base-fee ticket charge instead of two. However, some OFI members choose to execute the two trades separately as they believe it gets them faster fills and/or better pricing.

The good news is that Jim’s biggest winners have been from rolled trades! In this  video, he explains how you can sometimes greatly increase your credits by rolling.

While patience is a virtue when placing a new trade, rolling should be initiated as soon as possible, with frequent gradual price adjustments as needed until the order fills (see Jim’s price-adjustment instructions at the bottom of the roll Trade Alert). Since Jim often works in the wee hours of the morning and posts his Trade Alerts on the  Options for Income website first, experienced OFI members log into the website to read them here instead of waiting for the email and text-message Trade Alerts to be broadcast.

If you enter the roll trade yourself online, be careful to set up the legs exactly as Jim writes them in the Trade Alert. For each of the legs, triple-check that you’ve correctly entered the leg as “buy” vs. “sell” and “to open” vs. “to close,” whether that leg is a “put” vs. a “call,” and then verify whether Jim wants you to ask for a “credit” vs. a “debit.” 

If you have any questions about using your broker’s website to manage the trade yourself online, your broker should be eager to coach you through the process. TD Ameritrade’s thinkorswim platform offers this  Placing Option Trades: Vertical Roll video. And if you’d like to see a video for rolling an Options for Income put credit spread trade into a call debit spread trade using TD Ameritrade’s thinkorswim platform, it’s at the bottom of this page: Put Credit Spreads vs Call Debit Spreads — What is Jim Thinking?

Or you can simply call your broker and read Jim’s roll instructions aloud, though some brokers charge extra if you ask them to place the trade in your stead.

For more information about how rolls contribute to your OFI profits, see  Do I Really Need to Do the Rolls?

If you have other questions about the trade itself, you’ll likely find the answers in the Stock Talk discussion at the bottom of that OFI Trade Alert.