How Does Rolling a Short-Dated Crypto Option Hedge Impact Overall Cost and Risk?

Rolling a short-dated hedge involves closing the expiring option and opening a new one with a later expiration. This process incurs additional transaction costs, including brokerage fees and bid-ask spread slippage.

The primary risk is that the market moves unfavorably between the roll, forcing the hedger to purchase the new option at a significantly higher premium. Frequent rolling can erode the hedge's profitability, making it less effective than a single long-dated hedge.