Getting out with Profits

Discussion in 'Risk Management' started by JoeF716, Apr 17, 2008.

  1. JoeF716


    I am an options swing trader. After my stock makes a good run, I can't decide when to get out. When my target price is reached, I want the stock to keep going and profits to keep coming (of course). So, I have been sizing down once that price is reached and then just watching the stock closely after that for a full exit.

    Anyone have any better ways?

  2. Profit management is tricky, are you trading more than just 1 lot at a time? If i swing trade securities usually i take off in thirds. One 1/3 initially after like 10-15% gain and then 2/3 around 20-25% Then you can feel more comfortable with that last 3rd churning around to get those really impressive returns.

    Obviously options can have massive returns, however you can also swing from a profit (full position) to a loss in one trading period.

    Doing the 10-15/1 20-25/1 approach has worked well to get those emo feelings under control when the underlining security is trying to break out or consolidate.
  3. When the price gets beyond Bollinger Bands (2 standard deviations) is good rule of thumb to me.

    give it away you bastard
  5. The nature of your question tells me that you have not yet achieved a high enough degree of sophistication in options. You seem to use them mainly as leverage instruments.

    I once wrote a post in which I compared climbing a ladder to using options to trade the stock. You may want to check it. It contains the cure to your problem. You still think like the stock trader who has only one way to take profit: that is to reduce his size. With options you have other ways to lock profits, and still participate in the upside, and even reverse and play the downside.