Wondering if any position or swing trader (option trader) has some input on trading opening gaps. +AAPL Nov11 400c at 2.90 Gap opening. I figure it will sell-off, so take profits in first 2 minutes, leaving 2++ points on the table. One of my rules is: exit within 15% of what I believe will be a top price for the period; if so, then its a reasonably good trade. So, if sell @ 6 would not be too disappointed if the calls only hit 7 bid. Another strategy of mine with options, in these volatile markets with so much reversion, is whether I believe if I sell the entire position (for example after a gap opening rather than scaling out) I will be able to most likely re-enter at a better price within that session, or during that week (in the case of weekly options) or expiry. Any reasonably successful option/equity trader(s) who maybe is willing to offer some input as to how they deal with opening gaps, and exit long options in similar circumstance. In this case APPL did not sell-off (so far). Thanks for any serious comments/thoughts
Mod: can you change title to "gap openings - exiting long options" and move to 'Options' forum Thanks!!
I keep an eye on overseas markets overnight. Three days ago, the German DAX had a huge white candlestick when US opened. I figured US had to sell off to assist the DAX in dropping off such high levels. I did a good job selling. This morning, the Nikkei & Hang Seng sold off from their open, and India was little changed. The DAX was sitting relatively high. So again, I sold some longs and it worked. (Repurchased my longs at lower prices.) On the other hand, you have to be cautious also. One time, the DAX was sitting around doing nothing, US forced the DAX into rallying to make a new high. A day or two later, it was the same situation, but instead we dumped. Sometimes we can be surprised by what US will do while Europe is still open. Currently with the time changes, Europe closes 1 hour after the US opens for trading. All summer, Europe and US had 2 hours to run together. So you have to keep an eye on overseas markets.
As of last Sunday (Nov 6), the difference (between US open and European Close) is back to 2 hours for exchanges on Central European Time (i.e. Frankfurt, Paris, Milan, Madrid, etc), and 3 hours for UK on GMT.