Jim Cramer says in his book that I can do a "roll-over" on my contract, and instruct my broker to "swap my call" from this month with a contract from a later month. He says there's a small commission(much smaller today, than when he used to do it) and there's also a small spread between the sale of the call and the buy of the new one in a different month- but that spread is minor in the over a scheme of things. He says for basically no more than pennies I can roll this contract over, preserving the trade at "very little cost".
I asked Scottrade, If I could do this and they said there was no way they knew of to do a roll over, but that I was certainly able to buy another call for the following month.
Have rules changed since his publishing(2009), Am I using the wrong trading platform, or Is Cramer talking out of his ass?
I haven't really found him to be wrong on much, other than his picks(and his ties).
Could someone shed a little light here?
What do you mean by "preserve the trade"?
In order to roll the trade out to another month, you first close the current trade and then roll it out to another month.... and/or to another strike as well.
Perhaps I'm not clear what you are asking.
Rolling is just a fancy way of saying you want to close down the current stock/option trade, and then get right back into it, using different parameters of either strike and/or expiration date.
What is your goal in wanting to roll?
I'm going out. I'll read you later.
I'm no expert on options but I'm thinking Cramer was using the term "rollover" in the generic sense. There's no automatic way you can rollover your option, you have to do it manually. And of course that requires paying commission and the spread.
Rolling just means closing out the current trade and opening one further out.
The cost of the roll obviously depends on the price differences. But there is no way the cost to roll is "just pennies", unless you're talking about comission only.
What do you mean by "preserve the trade"?
In order to roll the trade out to another month, you first close the current trade and then roll it out to another month.... and/or to another strike as well.
Perhaps I'm not clear what you are asking.
Rolling is just a fancy way of saying you want to close down the current stock/option trade, and then get right back into it, using different parameters of either strike and/or expiration date.
What is your goal in wanting to roll?
I'm going out. I'll read you later.
Here's the exerpt from the second paragraph of page 182 of his book "Getting Back to Even", where Cramer is explaining the advantages of not going out too far for the in-the-money calls:
"I still think- thousands of trades later- that the July in-the-money calls[as opposed to the Oct. in-the-money calls] represents the best bet, and here's why: as you get closer to the expiration date you can do something called "rolling over" your contract to the next month. That's simply instructing your broker to swap your July in-the-money call for a later month as you get closer to the July expiration date. If you are going to a near month, there will be, just as in the case of the original call, very little premium over the common stock. So if your stock hasn't moved yet and you still think it will, you can just keep risking the same amount of money. There's a price to pay. You've got a small commission attached to the rollover trade, much lower today, by the way, than what I paid at the time. And there's also a small spread between the sale of the call and the buy of a new one in a different month, but that spread is typically minimal and barely factors in to the overall scheme of things. All in all, we are talking no more than pennies to roll over one deep in-the-money call to another in a later month, preserving the trade at very little cost."
If he is saying what I think you think he is saying, Wouldn't it have been easier for him to say:
"If the trade isn't going your way, you could always sell your current contract at whatever the current market gives you for it, and buy the same call for next month at whatever the market is demanding." ?
I doubt this would be at very little cost though- at least most of the time.
" you can do something called "rolling over" your contract to the next month...preserving the trade at very little cost."
If he is saying what I think you think he is saying...
I think maybe its the words he is using to frame his thought that are confusing me. Because you're not really "rolling over your contract", but are instead closing one and opening another. And your not really "preserving your trade", as you are, again, giving up one position, and then taking another.
