Roll Back

A roll back (or roll backward) is an options trading maneuver that closes an existing options position and opens a new one with a nearer expiration date. Aside from the expiration month, the new contract can keep the same strike or be adjusted higher or lower. Traders use roll backs to manage risk, adjust gamma exposure, or reprice a position to reflect changing market expectations.

Quick summary

• A roll back replaces an existing option with a similar option that expires sooner.
• It can be done with calls or puts, and the strike may remain the same (pure roll back) or be changed (roll up/down).
• Common goals: reduce exposure to long-term market risk, increase near-term gamma exposure, lock in gains or limit losses.

How a roll back works

1. Sell the existing option in the market to close the position.
2. Use the proceeds (and/or additional funds) to buy a new option on the same underlying with an earlier expiration.
3. Optionally, change the strike:
4. Roll up: move to a higher strike.
5. Roll down: move to a lower strike.
6. The move alters time decay, vega exposure, and gamma profile depending on the new expiration and strike.

Gamma and delta context:
* Delta measures how much an option’s price moves for a $1 change in the underlying.
* Gamma measures how much delta changes as the underlying price moves.
* Rolling to a nearer-term option typically increases absolute gamma, making the position more sensitive to near-term moves.

Examples

Call example:
* Replace an October 50 call with a September 50 call to shorten time to expiration.
* If bearish, you might roll back and down: swap an October 50 call for a September 45 call.

Put example:
* Sell a September 50 put and buy an August 50 put (closer expiration) to concentrate exposure in the near term.

Advantages

• Reduces exposure to longer-term market risk and volatility.
• Can lock in profits or limit potential losses by repositioning to a nearer-term view.
• May lower total transaction costs versus repeatedly trading the underlying security (one trade to replace another).
• Adjusts sensitivity to near-term price moves via gamma changes.

Disadvantages

• Requires experience—options strategies can be complex and carry significant risk.
• Speculation risk: repositioning can increase losses if the market moves against the new short-term view.
• May require a margin account or meet broker approval, adding costs or constraints (interest, minimums).
• Transaction costs and bid/ask spreads still apply and can erode the benefit of rolling.

Other roll strategies

• Roll up: move to a contract with a higher strike.
• Roll down: move to a contract with a lower strike.
• Roll forward: extend the expiration by moving to a longer-dated contract (opposite of roll back).

FAQs

Can you buy back an option you sold?
* You typically close a short option position by buying the same or a similar option (same underlying, strike, and expiry). If the exact contract is not available, you can offset the position with an equivalent contract to eliminate the short exposure.

Does rolling options count as a day trade?
* A day trade is any position opened and closed within the same trading day. Rolling that involves closing and opening positions within the same day can be counted as day trades. Holding an option contract across days generally does not count as a day trade.

What does it mean to roll out of an option?
* “Rolling out” generally means closing a current option and opening a new one with a later expiration (i.e., roll forward). It contrasts with rolling back, which shortens the time to expiration.