I frequently talk about "rolling" options out in time to extend duration, reduce cost basis, improve setup break evens, and increase profit potential, but if my review of recent postings on some options forums is any indication, I've basically taken it for granted that all options trading platforms have this built in as a "one step" process. Well, lo and behold, some still don't. They probably should, since doing something potentially complicated increases the likelihood that you'll fat finger something or make some other calculation error, rolling to a strike or expiry you didn't want or otherwise goof up what was a profitable setup up until that point. So for those of you who have these platforms, you should probably advocate for your broker to make this a potential, headache-reducing change going forward since it takes some of the fiddling around out of the equation.
In any event, there are two basic "old school" methods to close out one position and open another farther out in time and receive a credit for doing so, which is what you want in the vast majority of the cases. One is crude; the other, elegant.
The crude one is the obvious one. For example, in the pictured setup -- an AMD August 18th 70 covered call, you would do a two step process: (a) close out the 70 short call for a debit; and (b) sell a call at a higher strike for a credit greater than what you closed the 70 out for. Closing out the 70 would cost a 7.65 debit here (at least as of today's close), so you want to look at strikes higher up the ladder that pay greater than that amount so that you kill two birds with one stone: (a) you reduce cost basis further; and (b) you increase your profit potential.
Here would be some candidates: the September 72.5 short call, paying 7.80; the October 72.5 short call, paying 9.25; the October 75 short call, paying 7.95; the January 15th 75, paying 11.70. All of these pay a credit in excess of what you paid to close out your in-the-money short call, with no particular expiry being "the right choice"; it all depends on how much you want to stay in the trade, how long you want to stay in it, etc.
And now the elegant one: as a single order, buy to close the 70, sell to open a short call out in time that results in credit. As an example, say I wanted to roll out to the October 75 strike, I would "Buy to Close the August 21st 70/Sell to Open the October 16th 75", .28 credit. I reduce my cost basis by .28 ($28), increase my profit potential by 5 strikes ($500) -- all in one step. This is, in essence, what the broker is doing for you by giving you "rolling" functionality in its platform.
In any event, there are two basic "old school" methods to close out one position and open another farther out in time and receive a credit for doing so, which is what you want in the vast majority of the cases. One is crude; the other, elegant.
The crude one is the obvious one. For example, in the pictured setup -- an AMD August 18th 70 covered call, you would do a two step process: (a) close out the 70 short call for a debit; and (b) sell a call at a higher strike for a credit greater than what you closed the 70 out for. Closing out the 70 would cost a 7.65 debit here (at least as of today's close), so you want to look at strikes higher up the ladder that pay greater than that amount so that you kill two birds with one stone: (a) you reduce cost basis further; and (b) you increase your profit potential.
Here would be some candidates: the September 72.5 short call, paying 7.80; the October 72.5 short call, paying 9.25; the October 75 short call, paying 7.95; the January 15th 75, paying 11.70. All of these pay a credit in excess of what you paid to close out your in-the-money short call, with no particular expiry being "the right choice"; it all depends on how much you want to stay in the trade, how long you want to stay in it, etc.
And now the elegant one: as a single order, buy to close the 70, sell to open a short call out in time that results in credit. As an example, say I wanted to roll out to the October 75 strike, I would "Buy to Close the August 21st 70/Sell to Open the October 16th 75", .28 credit. I reduce my cost basis by .28 ($28), increase my profit potential by 5 strikes ($500) -- all in one step. This is, in essence, what the broker is doing for you by giving you "rolling" functionality in its platform.