When to get out of a failing option trade?

N

nxt7

I bought some weekly ATM puts at 2080 on the S&P in anticipation that falling crude prices would push it down a bit a few %. Obviously I got seriously burned when it crossed way above 2090 today... :banghead: Now how do I get out of this? I'm hoping it dips nearer to 2080 again before I close the trade and breakeven, but the upward momentum seems to be quite strong on this one...
 
When you entered the trade what was your plan for exiting it?
What percent of your account did you risk on the trade? Or did you "back up the truck?"

Just sell now and call it a tuition payment to Trader University.
 
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IMHO: I agree with stevegee58.
Regarding:-> "... I'm hoping ..." hOpium is commonly used, but seldom is wise.
I tried it with Linn Energy once and got castrated.
 
IMO ........ Options are too volatile to sell. That goes for opening a new trade or closing an existing trade at a loss. The debit paid should be your risk. If you bail early to "cut loses" you stand a very good chance of watching it re-bound back in your direction - without you.



Case in point:


EDIT: Long story short - Do not close your trade.





:)
 
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nxt7 said:
I bought some weekly ATM puts at 2080 on the S&P in anticipation that falling crude prices would push it down a bit a few %. Obviously I got seriously burned when it crossed way above 2090 today... :banghead: Now how do I get out of this? I'm hoping it dips nearer to 2080 again before I close the trade and breakeven, but the upward momentum seems to be quite strong on this one...
More...

Am guessing you don't have a Trading Plan?

I am actually short from farther below, market has to go much further up for me to ave down, only time I do outrights are covered calls or longs, 95% of my trades are credit spreads with limited risk. I don't know why you didn't have a stop when you were up 20 points on underlying.... But you need to have well detailed trading plan so you never have more questions when to do what.
 
When to get out of a failing option trade?"
You should already know this answer on your own before getting into the trade. :banghead:o_O

gordon.jpg

Read Sun-tzu, The Art of War. Every battle is won before it is ever fought."
 
I'm in the never sell, but used to risk 5% of account per option and go out of the money, so I'd make 20% on some trades,

1 stock had SEC issues, went for $22 to $10, I'd given up on it, 20x's there value!! :)
 
Handle123 said:
Am guessing you don't have a Trading Plan?

I am actually short from farther below, market has to go much further up for me to ave down, only time I do outrights are covered calls or longs, 95% of my trades are credit spreads with limited risk. I don't know why you didn't have a stop when you were up 20 points on underlying.... But you need to have well detailed trading plan so you never have more questions when to do what.
More...

You can put stops on option trades? Thats news to me. I do keep a record of my trades. I use mainly TA so I keep a note of the trend. But I don't know how much more detailed i can get with it especially if its as inflexible as a weekly option. I was actually planning to write a put at 2050 but I went with buying a put in the end....
 
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