When and How to Roll LEAPS
Updated
Rolling a LEAPS means selling your current option and buying another with a later expiration, a different strike, or both, in one transaction. Traders roll to avoid the fast time decay of the final months, to lock in gains, or to keep a thesis alive — but every roll is a new trade that should meet your plan on its own merits.
When traders consider rolling
- Six to nine months remain and theta is starting to accelerate
- The stock has risen well above the strike and you want to take capital off the table
- The thesis is intact but taking longer than planned
- Not a good reason: the trade is losing and you want to avoid realising the loss
Worked example: three choices
Illustrative example only — hypothetical stock XYZ at $100, implied volatility around 30%. Figures are rounded approximations, not live quotes, and ignore fees. One contract = 100 shares.
You bought a Jan $100 call for $14.80 ($1,480). Nine months later XYZ is at $115 and the call is worth about $21.20 (intrinsic $15.00 + time $6.20), an unrealised gain of $640.
| Choice | Trade | Cash / contract | Result |
|---|---|---|---|
| Close | Sell the $100 call at $21.20 | +$2,120 | Realise +$640; no further exposure |
| Roll out | Sell $100 call, buy next-year Jan $100 call at ≈ $26.40 | −$520 debit | +12 months of time; more capital at risk ($2,640 total value) |
| Roll up and out | Sell $100 call, buy next-year Jan $115 call at ≈ $15.00 | +$620 credit | Recovers about 40% of the original cost; new break-even ≈ $130 at expiry |
How to decide
Treat the new position as if you were opening it from scratch: would you buy the next-year $100 call for $26.40 today, with today's thesis? If not, rolling is just a way of avoiding a decision. Rolling up and out reduces capital at risk but lowers delta and raises the break-even, so the position needs another meaningful move.
Place the roll as a single spread order where possible, so both legs fill together. Check the bid-ask spread on the new contract — far-dated strikes can be wide.
Tax and record-keeping note
A roll closes one position and opens another. In most jurisdictions the closing leg is a taxable event, and the holding period restarts on the new contract. This is not tax advice; check with a tax professional.
Write the roll rule before you need it
Put the roll decision in the plan at entry — for example, “review at nine months remaining; roll up and out only if the thesis is intact and the credit covers original cost.” In SwingLEAP, record the review date on the trade plan, then log the roll as an exit and a new entry so the full history stays linked. Background on the decay curve is in How LEAPS Options Work and Choosing a LEAPS Expiration Date.
Part of the LEAPS strategies series
New to long-dated options? Start with What Are LEAP Options?, which covers the contract basics and links every LEAPS strategy guide, including the poor man's covered call, rolling LEAPS and LEAPS as stock replacement.