Roll is a basic Options defense strategy typically used on naked, out of the money positions.

There are 4 basic types of defensive rolls implemented into the system:

  • Slide Roll
  • Roll Out to the same Strike
  • Roll Out to the same Delta
  • Mexican Roll or Neutral Roll

Slide Roll

The “Slide Roll” is available for two legs strategies, typically a Strangle. The roll triggers when one of the two sides gets tested. When this happens, the algorithm will roll the untested side. It will roll down or up (depending on weather is a Put or a Call), and move the strike closer to the stock price. You can find a detailed example and explanation of the Slide Roll. The slide roll opens the new contract at the same expiration.

Roll Outs

Once the condition is triggered eDP will close the position and open a new one  by adding the specified time to the current expiration. These Rolls are always performed for a credit. The new position will be open at the same strikes, or at the same Delta depending on your selection. See the Roll Out article for detail.

Mexican Roll

The Mexican Roll is a dynamic strategy. It consist of rolling out to the next period (you may specify 30, 40 days out) and reduce the risk at the same time. The algorithm  will dynamically identify the strike(s) that meet both criteria lower delta, and positive , but a close to zero as possible additional premium. Visit the article on Mexican roll for details.