Hello, traders.
I'm Scott Conner, director of trader education
at TD Ameritrade.
Now Strategy Roller is a feature of the thinkorswim desktop
platform used to manage covered call option strategies.
By setting up a rolling strategy,
you can automate the rolling of your short call
from one expiration to another, according to simple rules
that you specify ahead of time.
Now let's jump right in the software
and show you how this works.
Now there's two ways to actually execute this.
Number one is follow my mouse.
I can click on the Strategy Roller, which
will take me to the function.
Or in the position statement, right
where Apple is, if I open up Apple, I can see my short call.
And by right clicking on that call,
I can jump up here to Create rolling strategy, left click
on that, and there we are.
We're right in to the rolling strategy sector.
First we can see any existing rolling strategies right here.
And we can drop that and open that up.
And you can see this account, there
are no strategies at this time.
Down below, we have eligible positions.
And what this will do is go through your position statement
and look at different positions you have that are eligible.
For example, we have Apple, a short call there, a covered
call.
And of course, Microsoft, a covered call strategy there.
Now with our example in Apple, let's go over the purpose
of using the Strategy Roller.
What we're attempting to do is set up
an automated way or approach to moving a short call out
to a future date.
And by us choosing all the different features
we want in terms of strikes, prices, times, dates,
expirations, that can all be done in one mechanized fashion.
First of all, the question is, how many of the options
do we want to roll forward?
Well you can see in this case, we have one,
and that's the default setting.
If I had, for example, several covered calls,
I could choose how many of those calls available.
Next, it's going to ask me what strike
do I want to roll my current short call to?
The default setting, of course, is the at the money call.
So the strike that I'm using is the at the money.
Now of course I can change this higher
to use one strike or two strikes or three strikes out
of the money.
And I can also go below zero and start choosing strikes
that are further in the money.
One strike in the money, two strikes, and three strikes,
for example.
Now a second way to choose your strike
is by looking or aligning the delta of that call.
So I'll move down here and click on delta.
And you can see it starts off with a 50 delta, which is
again, the at the money call.
Now if I'd like to change that, just click on the 50 delta,
left click.
And you can see, depending on whether I'm bullish or bearish
on the outlook for the stock, that could help influence
what delta I'm choosing.
For example, if I'm bearish and I
think the stock might be moving slightly to the downside,
I might want to move this up to a further in the money
call with a higher delta, maybe like 75.
If I'm bullish and I think the stock has some upward movement
potential, I'm going to choose an option that
has a lower delta or, of course, further out of the money.
Of course, the choice is yours.
For our example in Apple, let's go ahead
and choose an out of the money call
that is three strikes away.
So I'll move up to strike, leave that on three strikes out
of the money, OTM, and because my outlook perhaps
would be that I'm bullish and I would
like to give room for the stock to move a little bit higher.
Now let's go to the final step of choosing the expiration
date that we would like to roll our call to.
As you can see in our example, our Apple short call
expires on the 13th of March.
But down below, their expiration date is the 20th of March.
So you can see it defaults to the next expiration date,
and this happens to be one week.
Now of course we can choose different expiration dates
for that call that we're rolling to.
Now that we have our strikes and expiration dates chosen,
let's get down to the actual execution of the order itself.
Now to do that, I'm going to additional options.
And the first thing I'm going to look at
is when do I want my strategy to begin?
How many days from expiration?
Now we're looking at two days before expiration.
If I'd like that to be a little bit earlier,
like four or five days before expiration,
I can certainly change those days.
Keep in mind, there's a trade-off.
The closer we are to expiration, the less premium
will be left in that option.
Now what about the order price?
Well this gets to the execution of,
how is it going to get filled?
At the bid, the offer, or somewhere in between?
Now we're starting off at a 50% level in between the two,
so it's certainly up to you to choose which way you would
like those orders to go out.
If you want it to be midpoint between the bid and ask,
you can just slide the bar right down to the midpoint,
and that will take care of that.
Now what about the active time of day?
Well this simply tells us, when do we want the order to be in?
So for example, if I didn't want that order
to go out till maybe 15 minutes after the opening,
well I'd choose 8:45.
I can also manually enter those times, say,
for example between 9:00 and 2:50, as the example here.
Now I'm going to scroll down just a little bit further
and show you how you can actually
do this same thing manually.
I can grab the little slide bar here.
And as you can see as I move that,
you can see the same number changing in the box up above.
So this makes it a little bit simpler
to say, well listen, I don't want that order
to go out till around 9:30.
And then again, I'd like to be a little bit closer
before the close, maybe at, let's say, about 2:20,
and we'll use that.
Now again, if that is your choice,
you can go ahead and move those to those values.
And finally, I'm going to take this down to one
day before expiration.
If I would like to make sure that order does get filled.
In other words, if I'm not getting filled at my mid price,
I want to move that order to a market order to ensure that it
gets filled at what point?
Well let's say I want to move that out to maybe something
like 2:00 or 2:30, maybe something like that,
but sometime obviously before the close.
Now in the case that we're not using one day till expiration
and we have several days until expiration,
the move to market order function
will not take place until that final day.
Next let's look how a trader can be notified about any Strategy
Roller positions.
I click on the Notification tab here.
And I'm going to move to the Edit notification settings.
Now what you'll see here are some things
you need to go through to be notified.
First of all, once you've supplied an email address,
you'll have choices to some different things
that you can be notified about.
Now in our case, we've confirmed our email address and our SMS
text number.
We've also checked on rolling strategy events.
And now you can see where we can make some choices as
to how we get notified, whether email and/or both SMS,
and of course when to notify us.
We can see by default, again, that we
will be told anytime there's an active order or a routed note
order.
But again, we have a couple other choices.
In our case, we'll leave them all in place
and hit on Apply Settings.
Now we can see confirmation of the notification settings
that we chose.
And down below, we have a written confirmation
of all the parameters that we chose above
for our rolling strategy order.
The next step would be to confirm and activate the trade.
So I'll left click on that button.
And of course, now you can see all the information
about the account number and some
of the specifics of the trade.
The final step would be to click on Activate to actually make
this order become live.
We can now see under rolling strategies
all the parameters of our rolling strategy.
Now this order is waiting a trigger,
and of course that is three days.
It will begin three days before the expiration
of our short call, which is the 13th of March.
Now it's important to remember that we're
setting in place a process of rolling strategies.
In other words, this will continue
to roll even our 20th of March option
under these same parameters that we have set in place now.
So effectively, this will keep rolling
as the weeks come forward.
Now if I go over to my number three days
and I right click on the box, I can stop this strategy
and cancel it at any time.
I can replace the rolling strategy
and change or edit some of the different parameters.
And of course I can view the timeline of any past rolls that
have already occurred.
And now if we go back to the activity and positions page,
we can also see our rolling strategy
if we scroll down to rolling strategies.
Click on that, and of course you can
see that same order with all the same parameters listed
right here.
And that's how you use Strategy Roller to roll covered calls.
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head over to the education center on tdameritrade.com
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For more in-depth tutorials on the thinkorswim,
visit the thinkorswim learning center at tlc.thinkorswim.com.