Exit based on the price action/pattern, not on how much (magnitude) the price has moved, ie. 10 cents.
Price patterns are precisely how more highs or lows are made. A price pattern forms, gets people out or worse, they counter-trade it, pattern fails, more stops taken, yada yada new swings. Unless your entry signal is a pattern failure, but that's a whole new discussion.
Just on this issue currently, some progress thankfully!! The issue, is MOST trades won't go very far, so in those cases holding longer = less profit / SL hit. So you need a way to tell the difference between a short term trade and a long term trade. This varies hugely depending on your current method ofcourse.
Yes, great philosophy...keep a small "core" position, no matter how small and try to exit at favorable prices...I've found that I can make more on a small position that I can hold thru some "heat" as opposed to trading too many contracts and getting faked out at those same extremes.
Hello - Need some help please I am single orders option for about one year and yes you can say I am a novice. Just last week I got my feet wet and purchased my first bull vertical spread. I was under the impression that I understood how it works but boy was I wrong. Here is what I did on October 19th The stock is VXX was trading at $18.40 Buy at $0.15 - 20 calls -18.50 expiration Oct 23 and /sold 20 calls - 19.00 expiration Oct 23 Next day Oct 20th, VXX stock went to $19.10 so I decide to close my options thinking that I will be making the spread difference (my cost $0.15 –the spread $0.50 =$.035) but the option was not near that, was only 0.19. The 4 cents difference only paid for my commission so with the stock going up over the $19 the most I made or could have made was 4 cents or $80 in my case. What did I do wrong? Should I have waited on till the expiration day and then close my position? Please help me understand. My investment: Open Position -VXX at $18.40 10/19/2015 15:56:37 Bought 20 VXX Oct 23 2015 18.5 Call @ 0.53 10/19/2015 15:56:37 Sold 20 VXX Oct 23 2015 19.0 Call @ 0.38 Close Position VXX at $19.10 10/20/2015 12:20:18 Sold 10 VXX Oct 23 2015 18.5 Call @ 0.86 10/20/2015 12:20:18 Bought 10 VXX Oct 23 2015 19.0 Call @ 0.62 10/20/2015 12:22:11 Bought 10 VXX Oct 23 2015 19.0 Call @ 0.62 10/20/2015 12:22:11 Sold 4 VXX Oct 23 2015 18.5 Call @ 0.86 10/20/2015 12:22:11 Sold 6 VXX Oct 23 2015 18.5 Call @ 0.86
Okay, you understand, options are based on the chances of it getting to 19+ in the case of those calls. So 23rd, Stock closed at 19.5 then you'll get 50cents for it, the 50cents over the 19. As time goes by the option is worth less, as there is a lower chance of it getting past 19 enough to make it profitable. And when you only have a few days left, then the Time value decreases faster. Options are only good for trending stocks, or before a news release IMHO, the time devalue factor is just to damn painful.
How do you hold winners longer? Step 1 - Figure out which it is Step 2 - Create a consistent approach - to managing each trade RN
Typically Ill just rebuy, I don't like sitting through big pullbacks. If they stay with my strategy there is a chance they are goi Sorry that sounds confusing, the point is I'm trying to figure out how to hold the winning trades longer without losing when I'm not using my take profit strategy.