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Rolling My LEAPS Out To 2016

I prefer to keep the expiration dates on my long options positions dated as far into the future as possible. The thinking is, that if the market tanks, the greater time to expiration will cause them to have a greater increase in time value, setting up the opportunity to roll down and harvest the volatility.

With that in mind I started work on Jan 2015 expirations, looking to roll out to Jan 2016. Putting the trades in as calendar spreads, the bid/ask is fairly wide. However, as a rule of thumb under current conditions, I look to pay 1% of the strike as a debit to roll the position. I think of it as 1% interest on the notional loan of the strike price.

Most of what I rolled was priced around my 1% rule of thumb, with a few higher. Even trading in very small quantities it seemed as if the market-makers were willing to go along. In a few cases I rolled up at the same time, so the spreads were diagonals. I managed to get prices that I thought were fair.

This is a small detail, but during the financial crisis I found that the longer dated LEAPS behaved better as the market plunged to its final bottom. So for 1% to 2% why wouldn't I do it?