For the run away case, the share price also must never come down significantly after the significant rise, like the last year run.
Do we expect such sustained strong run away now? Less likely?
This is true and the expectation varies among market participants.
The event that happened to me and has led to my more aggressive rolls is I had some 810ish short puts back in Feb, right before the very fast move down to $600. I rolled a few times for a strike improvement and net credit but not nearly as fast as the shares moved and I've landed on 760 short puts for the last 3-4 months. I can keep rolling them the rest of the year, the year after, and forever really until the shares finally go back to ~$760 and turn the trade into a winning position.
And along the way the cash that backs those short puts is "dead money". It's reserved for the puts so I can't use it to sell other puts. Or buy leaps. Or withdraw it to use for a downpayment on a house, or pay for a college education, or a next gen roadster, or donate to a charity I really believe in. Anything.
That's on the put side, where I consider a return to 760 to be inevitable.
On the call side, which hasn't happened to me but I spend a lot of time thinking about, my worry is that the shares take off and they never come back. I've seen that happen twice (2013, 2020 - still an assumption on 2020). I own shares for the exposure to these big moves up, so losing them at a much lower strike is an outcome I want to avoid.
If I can roll the strike up fast enough then maybe I get to an 800 strike before I lose the ability to roll for strike improvements (shares at $900?). In that case taking assignment really won't bother me all that much. I'll lose out on that extra $100 share price improvement (in my made up example) but I've also rolled the strike aggressively so I get most of the run from the lower 600s that we started this last week.
And I've generated income along the way (important to me) AND I've put myself in a position to earn a return that I wouldn't have earned if the shares hadn't kept going. Which they almost always don't. It's the almost always part I worry about.
And that leads to my personal rule - roll early and often. In particular roll when within $5 of the strike. The quality of rolls while $5 OTM that others have reported sound amazing to me. I've been using ATM and $5 ITM as my timing to roll. I'll probably pull the trigger that extra $5 early the next time this comes up. The way I think about this is that I've collected some premium in week 1 but I haven't earned it yet. With the shares approaching my share price I decide early that I'm not going to earn it this week and roll to next week. My earning of that initial credit will take an extra week (or 2, or 3, or ..). As long as I have effective rolls I'll keep using them.
And at some point when I lose access to the effective rolls then it is time to take assignment, and start selling puts with the cash.
