Definition
Calendar Roll
A calendar roll moves an option position from a near expiry to a later one to extend the trade and reset time decay.
When a short option nears expiry, a trader can roll it by buying it back and selling the same strike in a later expiry, collecting fresh premium and giving the position more time. It is how option sellers keep an income strategy running week after week or month after month.
Indian option sellers on Nifty and Bank Nifty roll short strangles and spreads at or before weekly expiry, often rolling the tested side to a safer strike at the same time. The roll's net credit or debit, and the change in implied volatility between expiries, determine whether it improves the position.
Related terms
- Calendar Spread (Options)A calendar spread sells a near-term option and buys a longer-term option at the same strike to profit from time decay and volatility.
- Theta Decay (Time Decay)Theta decay is the daily loss in an option's value purely due to the passage of time, accelerating as expiry nears.
- Adjustment (Options)An adjustment is modifying an existing option position — rolling, adding, or hedging legs — to manage risk as the market moves.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.