Time spreads are unlike all the other strategies we have discussed
before when we talk about rolling or continuing the position
for trading forex options
. In other strategies, the option component
is limited to a single month. At expiration, the position disappears.
It either transforms into stock or expires worthless leaving
you with no option position. It is different in the case of
a trading forex options time spread because you are dealing
with two different expiration months. After the front month
expires, in addition to a potential stock position, you will
still have an option position the out-month option will still
have time until expiration. To properly roll that position,
you must first understand the new position you have inherited
from trading forex options.
Trading Forex Options Rolling The Call Spread
Lets look at trading forex options and the call time spread
first. For the purposes of our example, let us pretend we are
long the September / October 25 call spread. If our trading
forex options were to close below $25.00 on expiration Friday
of September, the September 25 calls would expire worthless
and you would be left with a long October 25 call position.
From this position, you would have several things that you could
First, you could just sell out the October 25 call. Hopefully,
the combination of the expiration of the September 25 calls
and their subsequent worthlessness along with the proceeds gained
from the sale of trading forex options and the October 25 calls
after September expiration might make a profitable trade.
You could keep your trading forex options position open and
continuing in several ways. You could stay long the October
25 call naked. You could sell the October 30 call and become
long the October 25 / 30 vertical call spread if you are bullish.
You could be trading forex options
and sell the October 20 call
and become short the October 20 / 25 vertical call spread if
You could buy the October 25 puts and become long the October
25 straddle if you felt that trading forex options could become
volatile. You could even sell the stock accumulated from trading
forex options and create a synthetic put if you were very bearish.
There are ways to create a new position that reflects any possible
future outlook an investor can have.