Is converting a larg(er) options trade to a smaller free option inferior behavior? Example: Thursday I went long XLF calls in March Struck at 12 (Spot was about 8.95ish) and paid $0.23 for each. For argumentâs sake, lets assume it was 160, costing me $3680+commish. Rationale behind the trade was a) wanted to be long US equities exposure due to relative cheapness, b) Treasury announcement/ bailout plan expected so didnât understand why XLF going down, c)they seemed cheap to me at the time. Friday noted that XLF was rising hard, so decided to convert my position into a âfree option.â Put in order to sell 100 of these March 12 Calls @ 0.46. Offer lifted near the end of the day, netting $4600-commish. At the moment, I was thinking that the move was too overblown too quickly, and my inclination is whenever I get a windfall profit, to take it. This leaves me with 60 XLF calls which are marked to 0.45 as of Friday. Take profits are to be at 0.72 and 1.41 for 30 calls each. Expectant profits on the trade are $1000 if all remaining calls expire worthless to about $7390 if all profit targets are hit. Risk/reward ratio on this is maximally 2.0 . However, it is bothering me that in putting on this OTM option call play, I am essentially pricing in at least a 20% move in the XLF (10% done already) with the resultant pop in volatility giving me some additional juice on the sale of the calls. With that said, if I was willing to risk the $3680 initial charge, should I have made an all or nothing profit target of .72, which would give me $11520 profit netting me $7840. Same risk reward ratio. Also, maybe a bit easier to execute. Any opinions here? Superficially, I think that the strategy I am executing is good money management, but suspect it may limit my profits over time. I am risk-averse by nature, and only really like to take higher expectancy trades.