12 Rolling and Recovery Strategies

No matter how cautiously you set up options strategies to hedge equities, some portion are going to lose rather than gain. In these instances, you will need to figure out how to manage the paper loss. This can involve just taking the loss, waiting out the market, or applying a series of rolling and recovery strategies.

A danger in any form of recovery is the potential increased risk. Most forms of recovery involve replacement strategies, and this can easily be translated into an exchange of a low risk for a high one, or an exchange between a conservative strategy and a risky one. Because the purpose of the option hedge is to reduce risks, one of your primary considerations should be risk awareness as a basic ...

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