Options

Roll and Roll Efficiency (Rolling)

A roll closes one option contract and opens another on the same underlying, usually with a later expiration, a different strike or both. Roll efficiency is a Foliograph metric and measures the roll credit per calendar day gained.

Calculation and mechanics

A roll consists of buying back or selling the old contract and opening the new one. Both legs are often executed as a combination order but can also be traded separately. The price difference yields a roll credit for a net inflow or a roll debit for a net outflow.

A whole spread is rolled by closing the existing legs and opening new legs.

Roll efficiency relates the roll credit to the additional calendar days gained (DTE new minus DTE old). Across several rolls, the median shows whether the extensions typically brought in or cost premium.

Roll efficiency = roll credit / days added

Distinction

Technically, a roll closes the old position and opens a new one. Foliograph, however, links both events as the continuation of the same trade so that the overall result of the strategy stays traceable across several expirations.

A spread, in which several legs are held simultaneously as one position, is to be distinguished from a roll. A roll can also be used to change the immediate risk of an assignment.

Related terms

All terms in the glossary

All market and analytical information is provided for educational and analytical purposes only and does not constitute investment advice or a trading recommendation.