Showing posts with the label bring-em-out-clean

Roll 'Em Out- Introduction

Roll 'Em Out Introduction The previous demonstrated that by writing LEAP puts on higher-quality issues  one or two steps below the at-the-money market price, it is possible to increase the rate  at which the options expire out of the money to levels ranging from 92 percent to 97  percent. An impressive result, to be sure, but more impressive results can be achieved by  rolling out any LEAP puts that appear to be winding up in the money as expiration  approaches. This entails a two-step process of (1) buying back the LEAP puts shortly  before the expiration date (thus closing out those positions), and (2) writing an  equivalent number of LEAP puts with expiration dates either one or two years away. You saw that there are numerous ways to carry out this type of mitigation  strategy. Besides selecting the expiration date, you can also choose an appropriate strike  price. Suppose an at-the-money LEAP put had been sold on a stock with a volatility of  0.40 and the pri