Profitable ATR
Once you're in a profitable trade and everything is working, you can begin managing the position actively. This step outlines how to roll the option when the stock has moved in your favor.
What to Do
1. Wait for a 1× ATR Move in Your Direction
○ Once the stock moves one ATR in your direction, it’s time to consider rolling.
2. Check if You Can Roll for a Credit
○ The key question is:
Can you roll up (or up and out) for a credit?
○ Example:
▪ You bought 115 calls.
▪ Things are going well, and you want to roll to the 117 calls.
▪ You would sell to close the 115s and buy to open the 117s as one order.
▪ If this roll gives you a $1.75 credit, that’s ideal.
3. Credit vs. Debit Roll
○ Rolling for a credit = reducing risk.
○ Rolling for a debit = adding risk.
○ If you can’t roll for a credit, don’t change the trade, just leave it alone.
4. Rolling Mechanics
○ Always execute the roll as one order:
▪ Sell to close your original position
▪ Buy to open a new strike closer to at-the-money
○ Maintain:
▪ The same liquidity standards
▪ The same number of contracts
5. Why You Roll
○ Takes partial profits
○ Frees up capital
○ Keeps the trade alive
6. Adjust Your Exit Point
○ After the roll, move your exit point up.
○ Set it at half an ATR below your new 1× ATR level.
This method allows you to manage a profitable trade by reducing risk, locking in gains, and maintaining position strength while adapting to price movement.
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