Understanding the Practice of Rolling

Rolling in trading refers to the practice of closing an existing position and opening a new one, typically done in a single operation through a brokerage platform. This process can involve various strategies such as rolling up, which brings the strike closer to the money, rolling down, which moves it further away, or rolling out, extending the duration of the position by moving it further into the future. While traders often pursue this strategy to avoid realizing losses and to maintain their positions, the act of rolling itself does not eliminate the original loss; it merely replaces one position with another. Therefore, it’s vital for traders to understand that they are not actually avoiding a loss, but simply reopening a new trade with a different set of risks and potentials.