Taking Profits

Discussion in 'Options' started by marcoPolo21, May 18, 2011.

  1. I just had the unpleasantness of a winner, turning into a loser.

    I wrote 1 HPQ May20' 40 Put, and I practically had the money spent.
    I don't mind owning 100 shares of HPQ, but it hurts my ego!
    [I have a big 0.70 credit cushion to work with]

    What I'm wondering is, do you have any guidelines for taking profits?
    Or do you simply take each case separately?

    I can't remember right now
    if I could have covered for say 75% of the 0.70 cents...maybe not.

  2. MTE


    Generally, I get out if I can book about 80-90% of the profit, however in certain situations I may get out earlier. It really depends on the trade.

    I presume you got hit by earnings. In this case, unless I actually wanted to be in a position during the announcement, I would've closed out prior to earnings.
  3. I take profit when volatility expands greater than the previous 3 bars on whatever time frame I'm using. Works well for me.
  4. I think it was earnings, which I wasn't paying attention to.

    I just thought of another possibility, which I read about.
    Buy 2 contracts, instead of 1 [or twice your standard].
    Then hopefully sell 1 at a profit, and freeroll with the other.

  5. There's no set in stone rule of thumb that guarantees anything. News (and price) can change at any moment. There's art, skill and luck involved in picking positions and exiting them.

    One thing for sure, get out of the way of earnings announcements unless you are intent on playing them via direction, volatility, etc.