What do Cowboys and Option Investors have in common?

Once a month, I sit in front of my computer while I trade and hum the theme song from the old Rawhide TV Show. Keep those doggies rolling. Move ‘em out, roll ‘em up, roll ‘em out. Don’t try to understand them, just rope, roll and brand them. And some days, that’s just how you will feel — Like you’re herding cattle to market. You keep your herd of options on track to get them to market and sometimes you will have to bolt out and lasso a stray before it gets away from you. If you plan right, most of this option rolling activity should happen the week after the new options come out. (I’ll tell you later why this is a good week.) It’s like an old west cattle drive.

Get your cattle ready for the drive.

First of all, let’s assume you’ve sold that first call option and it’s sitting in your portfolio about a month away from expiration. It’s one of those covered calls you wrote to put some money back in your pocket.

With covered calls, you sell someone the right to buy your stock at a set price (strike price) anytime before a certain date (expiration date). And they pay you for this right in cash, today. If the stock does not hit that strike price, you can sell another call option if it meets or exceeds the strike price on or before expiration date the stock could get called away and you will be paid on the expiration date.

But most call sellers don’t want their stock called away. It’s better to just keep collecting call option premiums and keep the stock.

How do you roll these doggies?

The basic concept behind a roll out or roll up is that you will trade one call option for another one. You buy back the current option then sell another option further out in time. Since the further out option has a higher price (because there is more time value built into it), you should make a profit by doing this transaction.

Think like a cowboy herding those doggies.

If you get into the monthly option herding habit, you will find that your portfolio will turn into a consistent money generator. Since you can look at the option calendar, you know the days when you will be busiest and you can plan your schedule accordingly.

Don’t feel obligated to wear a cowboy hat when you trade. My wife just laughs at me when I put mine on.

If you have a Covered Call already, PowerOptions can show you the most profitable and