Rolling options on the Interactive Brokers Trader Workstation (TWS) app involves utilizing its specialized "Rollover Options" tool to manage your existing positions efficiently. This allows you to close an expiring or undesirable options contract and simultaneously open a new one with a different expiration date, strike price, or both.
Accessing the Rollover Options Tool in TWS
Interactive Brokers' TWS offers distinct interfaces – Mosaic and Classic TWS – each with a specific path to access the advanced option tools.
To roll options, follow these steps based on your TWS interface:
| TWS Interface | Steps to Roll Options |
|---|---|
| Mosaic | Click the New Window button in the top left corner and select Advanced Option Tools > Rollover Options. |
| Classic TWS | Click the Trading Tools button across the top of the page and select Advanced Option Tools > Rollover Options. |
Understanding Option Rolling
Rolling an option is a strategic adjustment to an existing option position. It typically involves:
- Closing an existing option contract: This could be a long or short position that is approaching expiration, has moved against you, or has become profitable.
- Opening a new option contract: This new contract will usually be on the same underlying asset but with a different expiration date (further out in time) and/or a different strike price.
Traders roll options for various reasons, such as:
- Extending Time: To give a trade more time to become profitable, especially if the underlying asset's price movement is taking longer than expected.
- Adjusting Strike Price: To move to a more favorable strike price (e.g., rolling down a call or rolling up a put) to capture profits or reduce risk.
- Taking Profits/Minimizing Losses: To lock in gains or mitigate potential losses by closing an existing position and opening a new one under different terms.
- Generating Income: Rolling a short option position for a credit can extend an income-generating strategy.
The Option Rolling Process on TWS
Once you've accessed the Rollover Options tool, the general process on TWS typically unfolds as follows:
- Select the Position: Identify the specific option contract you wish to roll from your portfolio or watch list.
- Define New Terms: The tool will present you with options to select a new expiration date and/or a new strike price for the replacement contract. You'll typically see various combinations.
- Review the Roll: TWS will calculate the potential debit or credit for the entire roll transaction (closing the old and opening the new). Carefully review the new contract details, the net premium, and any associated commissions.
- Submit Order: Confirm the details and submit the order. TWS will execute a single, multi-leg order that combines the closing and opening trades.
Key Considerations When Rolling Options
- Transaction Costs: Be mindful of commissions and fees for both legs of the roll (the closing and the opening trade), as these can impact your net profit or loss.
- Market Liquidity: Ensure there is sufficient liquidity for both the existing option and the new option you intend to open. Illiquid options can lead to wider bid-ask spreads and less favorable execution prices.
- Strategy Goals: Re-evaluate your original trading strategy and confirm that rolling the option aligns with your current market outlook and objectives.
- Time Decay (Theta): Understand how rolling will affect the time value of your options, especially if you are extending the expiration date.
For more detailed information on options trading and specific functionalities within the Trader Workstation, you can visit the official Interactive Brokers website: Interactive Brokers Options Trading.
