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When to Roll A Covered Call

Options Jive

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We are convinced that the best chance you have to beat the market averages is by reducing your cost basis. A strategy of using Covered Calls is one effective and simple way of doing that. It’s a bullish strategy but one in which if we consistently roll the call forward we continually reduce our cost basis. What is the best way though to roll those calls?

Our study was conducted in the SPY using data from 2005 to the present. We sold Covered Calls with a 30 Delta and compared rolling at expiration or rolling when the Calls dropped below 0.25 (if possible or we rolled at expiration). This study on rolling calls is the first of two that are planned. A later study will examine rolling at 50% of max profit .

A table of the results comparing the two strategies was displayed. The table included the cumulative stock P/L, cumulative call P/L, cost basis reduction, cost basis reduction (30% margin) , number of rolls, percentage of profitable calls. The table showed a dramatic increase in cumulative Call P/L and cost basis reduction percentage. Rolling when premium was low, yielded the best returns.

For more information on Rolling see:

Watch this segment of Options Jive with Tom Sosnoff and Tony Battista for the important takeaways and a better understanding of when is the best time to roll a Covered Call.

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