How to Roll Put Options for Monthly Income
Selling put options is one of the most reliable ways to generate steady cash flow. But every trader eventually faces the same question: when a short put is close to expiring or has moved against you, do you take assignment or roll it forward?
Learning how to roll put options gives you more control, extends your time to profit, and keeps your capital working month after month.
When to Roll a Put Option
Rolling means you buy to close your current short put and sell to open a new one that has a later expiration date. The best time to roll is when most of the option's time value has already decayed, when the contract is barely earning you anything.
This is where Theta comes in. Theta measures the rate at which an option loses value each day as it approaches expiration. When Theta drops near zero, it's time to roll.
Example: Medtronic (MDT)
A $100 September 18 put was sold for $3.09 about 30 days before expiration. With three days left, it was worth just $0.08, and Theta had dropped below one cent per share. At that point, there's nothing left to earn. Rolling into the next month's option resets Theta and brings in new income potential.
💡 Pro Tip: Once Theta falls below 0.01, start looking for a roll.
How to Extend a Put Option Position
Sometimes a short put finishes slightly in the money. Instead of taking the assignment, you can extend the trade by rolling the option to a later date at the same strike. You'll collect another credit and give your trade more time to work.
Example: Brookfield Infrastructure Partners (BIP)
A $50 put option expiring on September 18 was rolled to an October 16 $50 put option for a $0.65 credit, representing a 15.3 percent cash-on-cash return. Even though the stock dipped below the strike, the trader remained in the position and was paid to do so.
Example: Bank of America (BAC)
A $26 September put sat in the money. By rolling it to October at the same strike, the trader targeted a $0.89 credit. Checking the same-strike call (worth approximately $0.13) confirmed that the put had little time premium left, making it the perfect moment to roll.
💡 Quick Check: When in doubt, look at the corresponding call option. If it's nearly worthless, the put's time value is gone too.
Rolling Deep In-the-Money Puts
Deep in-the-money puts require extra care. Once an option's time premium drops to just five or ten cents, assignment risk rises quickly. Don't wait until the week of expiration to act.
Set alerts on both the short put and its matching call. When the option's value reaches your alert range (approximately 10-15 percent of the original premium), review the trade and roll it before the assignment risk increases.
Sometimes the best move is to roll farther out than usual.
Example: Lazard (LAZ)
A $37 September 18 put was deep in the money. Rolling it to October yielded about an 11 percent annualized return, but rolling it to December increased that to 12.3 percent, roughly a 10 percent better yield by going two months farther.
💡 Pro Tip: Always compare multiple expirations when rolling deep in-the-money puts. Sixty or ninety days out often provides better returns and more room for recovery.
Building a Monthly Rhythm
Active income traders develop a rhythm with rolling. About 85 percent of positions can be rolled each month, while around 15 percent need to be closed and reset with a new ticker or strike.
Rolling lets you recycle capital efficiently. You're not chasing home runs, you're capturing steady, compounding income while staying in control of your trades.
Takeaways
⚡ Let Theta guide your timing. Roll when daily decay slows down.
⚡ For in-the-money puts, use the corresponding call price as a quick check for remaining time premium.
⚡ Set alerts so you can act before an option decays to just pennies.
⚡ Compare multiple expiration dates for deep in-the-money rolls-;longer can mean better yield.
⚡ Keep your capital working by rolling consistently into higher Theta setups.
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