Happy Friday, tradersโฆ
Ben here.
Tell me if this has ever happened to youโฆ
Youโre in the middle of an options trade, watching your position climb steadily into the green.
Everything looks great โ youโve done your research and nailed the entry. Youโre up big on unrealized gainsโฆ
But then the thought creeps in: โShould I be like Steve Miller and โtake the money and run?โ Or does this trade have more juice left in it?โ
Itโs a decision every trader faces, and the stakes are highโฆ
On one hand, you could book your profits now, ensuring you walk away with a small win. But on the other hand, if you exit too early, you might miss out on a life-changing trade.
Knowing when to exit a winning trade is one of the most delicate balancing acts in the options marketโฆ
Itโs easy to get caught up in the thrill of seeing green on your screen, but holding on too long could erase your gains in a heartbeat.
Half the battle is finding the right setup and entering at the right price point โ but exiting at the perfect moment for maximum gains? Thatโs what separates master traders from the 90% who lose money.
All the hours spent researching stocks, analyzing charts, and finding great setups can unravel in the blink of an eye if you fail to exit at the right time.
This is even more critical if youโre day trading weekly options, where time decay can turn a profitable trade into a losing one in mere minutes โ or even seconds.
The pressure to decide when to cash out or let it is intense, and getting it wrong can blow your trade up.
But there are some simple methods to make this decision easier, and employing them could exponentially improve your trading performance.
With that in mind, let me show you how to exit your trades for maximum gainsโฆ
The Tough Decision
If thereโs only a day left on your contracts, you need to secure your profits immediately.
But if thereโs a week (or more) left until your expiration date, and the contracts are up considerably from where you bought themโฆ
Then, youโre faced with a tough decisionโฆ
Do you hold the winner or take the money and run?
Thereโs no one correct answer for every potential tradeโฆ
But there are certain things to look for that can potentially help you make this callโฆ
Next time youโre in the green and trying to decide where to sell, consider the followingโฆ
Know Your Price Target (and Your Risk Level)
You should always have a price target where you plan to exit โฆ before you enter the trade!
I like to have a target for the share price as well as for the options premium.
For example, Iโll write in my trading journal โIโm aiming for Stock XYZ to hit $95, or to hold the contracts Iโm trading from $1.20 to $2.50ish.โ
I also include my stop-loss level โ a price at which Iโll sell if the trade starts going against me.
For example, on my recent slam-dunk Nike Inc. (NYSE: NKE) trade, I wrote: โBought NKE OCT 18 $83 calls at $.55. First target is $.66. Stops at $.44 or $82.65โ
This means that Iโm aiming for $83+, but if the stock drops to $82.65 (or the contracts drop to $0.44), Iโll cut the losses and move on.
Scale-Out of Your Positions
If you follow my trading alerts, youโll notice that I always scale out of my positions.
As opposed to simply selling all of my contracts at once, this allows me to take some risk off the table and lock up safe profits โ while still having some skin in the game.
I never worry about holding winners vs. booking profits. I simply scale out according to my plan.
I made this exact move on my aforementioned NKE trade, which led to peak gains of 170% in less than 48 hours:*
Notice that on each scale, I have a clear plan for where I will sell my next batch.
Plan your trade โ and trade your plan.
You donโt have to enter and exit the entirety of your position at one time. If you arenโt already, start considering a batch approach to selling your contracts.
The Bottom Line
For most setups, itโs best to sell all of your contracts once theyโve hit your price target.
After all, you canโt lose money by booking profits quickly โฆ you can only miss out on theoretical gains.
If you view the decision as a total coin flip, you should err on the side of caution. Take the money and run.
But if you truly believe the stock is set to hit a higher price target โ with research and due diligence to support your thesis โ consider employing the strategies Iโve laid out today.
That way, when you hit your price target, youโll know how to exit like a pro โ for maximum gains.
Before we go, letโs look at:
๐ฐThe Biggest Smart-Money Bets of the Day๐ฐ
- $1.5 million bullish bet on SOFI 11/01/2024 $10 calls @ $0.57 avg. (seen on 10/17)
- $1.4 million bullish bet on NVDA 10/25/2024 $140 calls @ $3.45 avg. (seen on 10/17)
- $1 million bearish bet on X 01/17/2025 $30 puts @ $1.81 avg. (seen on 10/17)
Happy trading,
Ben Sturgill
P.S. This earnings season could be your biggest trading opportunity yetโฆ
Despite what many traders think, you can often see whether a company will beat or miss before the rest of the market finds out.
Realizing this, Iโve designed a specialized system to accurately exploit earnings season for potentially massive winsโฆ
Example: This calendar system projected a 91.2% earnings beat on Broadcom โฆ BEFORE its call options exploded 1,014% in less than a day!*
Thatโs why StocksToTrade Lead Trainer Tim Bohen is joining me for a LIVE Earnings Edge Workshop on Monday, October 21st at 8 p.m. Eastern.
Seats are filling up FAST โ Click here now to reserve your seat before itโs too late!
*Past performance does not indicate future results
