3/4 of my nice profit for the last three weeks on my flies and straddles just evaporated. Blue chip bull spreads and short euro hanging in there, but not enough in those to offset this mess very much. Guess I'll bail out of this stuff tomorrow one way or the other--getting uncomfortably close to April expiration anyway. Aarrrgggghhh.
That is why you should always take your profits. Bird in hand is worth two in the bush. Trying to squeeze out the last few nickels is just going to set you up for a poor risk/reward situation. Especially as Gamma risk increases with the less time left. You should watch Deal or No deal.
I don't know if there are any lessons--if there were I would be happy to share them, but I am still figuring it all out myself. I managed to squeeze out a few bucks. I know that's just the way it is some months--you are up and then it goes flat on you. Maybe I am just being a big baby, whining at everyone here, but thanks for commiserating. Portugal messed me up. Lucky for them I love their beautiful country. Shorts is telling me to take profit earlier (and needless to say, I wish I had in this case) but taking profit too early is actually one of my problems. So now I am trying to learn to stay in things a little longer. What I am doing is experimenting with short straddles on ETFs and ETNs, trying to find the optimal time to take them off and put them on. For example, put on 2-mo positions on a high volatility day for that underlying, adjust as needed, then take them off a month later (a month prior to expiration). This time I decided to wait a day or two longer, and it did not turn out to be a good thing. However, I think it will take many more of these trades for me to figure out the general course of things and develop a mature game plan. I have only been at them for about five months. As for the flies, those are a little more comfortable for me because I have more experience with them. Those positions are still on (so maybe it's bad luck to talk about them --one can be a little more relaxed with those. I could have taken them off early at 11-12% instead of trying to get 13%-15%, but again I am trying to be just slightly more aggressive. I may still get 13-15%, I don't know. I start at around 30-45 days and get out at around 18-25 days to expiration. They are wide flies so they act a lot like straddles. Wait for high IV days, put one on, then let the market move a little, wait for another high IV day, put another one on, etc. Adjust when necessary. I like the ITM bull spreads when the market is acting like this--reasonable upward progress with helpful pullbacks that allow you to put positions on. Even though the skew is generally against you it is still possible to make money. I like the blue chips for those because they are liquid, and the blue chips are just starting to run now. But I don't do too many of these directional things. No lessons here, just a lot of rambling....
Taking profits is never a problem. As long as you are taking in profits, even if you leave money on the table things are fine. It is when you try to overstay your welcome and you get clobbered. Since risk increases rapidly as the options get closer to expiration.