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Option Traders Unite Forum > Figuring out when to Hold and when to Fold

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MILLION

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Posted August 14, 2009 (02:41PM)
Hi, I need some help. I just starting trading options and am stuck. I have about 8 different companies I am
trading and all but one expires in Jan 2010.
Yesterday one had a gain of $74 on my investment of about $210 and I couldn't decide if I should sell since it doesn't expire until Jan. Why wouldn't I take the gains as soon as I see them? Or since the expiration is so far off should I wait???
I'm very confused.
With stocks, I've been taught to hold the winners and lose the losers BUT with option there is time so should it be reversed?
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stugots

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Posted August 14, 2009 (10:08PM)
I will assume you are only buying, puts and calls  if that is the case your moves are purely speculative and such principals should be used.   you have no hedges set up so you ins and outs asre strictly you call, there is no set rule or reason to get in and out.
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WSP

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Posted August 20, 2009 (03:36PM)

MILLION said: Hi, I need some help. I just starting trading options and am stuck. I have about 8 different companies I am
trading and all but one expires in Jan 2010.
Yesterday one had a gain of $74 on my investment of about $210 and I couldn't decide if I should sell since it doesn't expire until Jan. Why wouldn't I take the gains as soon as I see them? Or since the expiration is so far off should I wait???
I'm very confused.
With stocks, I've been taught to hold the winners and lose the losers BUT with option there is time so should it be reversed?

 Hello Million, I have practiced having exit strategy before I even place the trade. I always pick a percent gain I am happy with and the max loss I am willing to take.  In doing this I take away all of the emotion in the trade.  I also do not kick myself for not staying in a winning trade long enough or for getting out of losing trade too early.  You may also want to look into some hedged trades and take advantage of high and low vol.
Good Luck Widespreadpanic
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options4u

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Posted August 20, 2009 (07:33PM)

I have run into same delimma in past. Though I have learned from past mistakes and try to get out of the trade after my profits are locked in, however, since the price on option varies a lot sometimes  (so called volatility :)) ,it kind of hard to do limit orders (% point based).

I try to follow the rule of 10% downside is all I can handle but then again, option can come down 10% and go back up the very same day. How do you tackle that?


Also, I had a general question, how do you trade on the last day of the option .for example  tomorrow ? how do you get sense of  direction on a stock or market on option expiry day ?


Any thoughts would be appreciated.



 
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OldFart

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Posted August 20, 2009 (09:48PM)
options4u - check out the books by Jeff Augen, "Trading Options at Expiration" and the previous one. Advanced topics
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MILLION

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Posted September 10, 2009 (11:38PM)
Hi options4u,
I only buy long term options that expire 6 months or more. One problem I have had is that I need to make sure that there is heavy volume on the stock I'm buying the option from. I read the charts to get in but once I'm in it's up and down.
Since options expire the same time every month; how you noticed any pattern of selling or price fluctuations as a result?

Thanks for the input you guys!

Karen
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KINGHANK

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Posted October 07, 2009 (08:35PM)
Hi Million,

Congrats on your position, I think any profit is a good deal.
Looks like you still have lots of time till expiration in Jan'10. However, I expect a big market correction between now and Jan'10. And regardless of which stock, I am pretty sure it will go down and your premium will erode...therefore, I would take the profit you have and wait for the next opportunity to go back in, sometime in Dec'09. I have been wrong before, but this is just my 2 cent.  Good luck!