August 5, 2020 06:26 PM RSS

The Options Roll And It Is Not A Type of Sushi Roll!

  • Wall Street Rebel | Geoff Garbacz
  • 10/11/2018 10:06 PM
The Options Roll And It Is Not A Type of Sushi Roll!
We wrote this today for Gold & Energy Options Trader on why we rolled two option recommendations and how it turned out. Using "the roll", is a nice weapon to deploy when you need more time. We hope you enjoy.

Every once in a while it makes sense to roll a trade that is not working but you think it will work and it needs more time.

As we came into this week, we knew that we needed to roll both our USO puts and GLD calls. Why? Expiration was starting us in the face next Friday, October 19th and both recommendations were below the strike price.. 

So we first rolled the USO $16 October Puts to November $15.50 Puts on Wednesday. Then today we rolled the GLD $114 October Calls to November $116 Calls. The details are below on the roll.

[Image 1]

This spreadsheet is how I track trades. You can see the original trade lost money but the roll made money and the overall trade made money. Finally today USO dropped and GLD rocketed. Sometimes you have to be wrong before you are right! I firmly believe this statement. Most investors/traders cannot handle losing but we realize it is part of our process.

Key to this process is we did not throw more capital at the trade. No average down. Instead we take the original capital less the loss from the initial trade and roll to the next month.

The GLD trade made 20.36% and the USO trade made 0.11%. That is fine because the initial goal of the roll is to get your capital back and then if it is a winner that is a bonus.

For the year we are now up 116% with 10 winner and 1 loser. Using our four unit process this is a gain of 29% versus the S&P 500 return of 2.04%.

Next week we will review the four unit process and how to allocate capital to our recommendation. Until then, have a great weekend.

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