But how we got set up for that trade is important; GameStop was a great play, but the next one is coming up soon.
You don't have to have an eagle eye on the markets all day, either - even though I think that's fun.
All you have to do is tell your broker this...
Why You Should Always Use This Kind of Order
"Make that good 'til cancelled," I always say after putting in every trade. The good-til-cancelled (GTC) order type can be used on stocks and options.
Now, it's important to note here that the New York Stock Exchange recently stopped accepting good-til-cancelled orders and trailing stops, but the Nasdaq accepts them, and besides, any brokerage worth the name will happily take these for you even if you're trading on the NYSE.
It is an order to buy or sell at a specific price, like you'd expect, but here's the thing...
That order stays with your broker for a full 30 to 90 days, or until you cancel it yourself, which is about the time frame most brokers will allow an order to sit around on their books.
It's so powerful because it gives you the space you need to be patient and make sure conditions are best for you to make a killing.
Even better, GTC orders work to your benefit when opening and closing. I'll show you how in a moment, but first let's take a look at our big recent win...
Here's how that GameStop buy-to-open order might have looked on your broker's platform:
The GameStop trade had a limit order price to buy the April 2016 $27 calls at $2.75. On the day the order filled, it did so at the beginning of the day - for almost the entire rest of the day, it had no more fills at that price.
Here's why that's important.
You see, new traders have a tendency to start chasing the option. The price of the option bumps up a bit - away from them - by, say, $0.25. And so they try and go get that slightly higher perceived price only to see it bump up another $0.25, and so on, until... they end up paying too much, or at least more than they had as their original limit.
There are other benefits, too...
You Don't Have to Make the "Rookie's" Mistake
A GTC order gives you the space to maintain that all-important discipline - and let the trade come back to your limit price - rather than "chase and overpay."
Case in point: This option came back to that $2.75 on Wednesday, and could have been filled at that limit price on that day.
Here is what the stock did as this trade played out:
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The GTC order can work on a closing order just as well as it can on an opening order. Once the trade was filled, one could place a "sell-to-close, GTC order" on the options.
Since the fill was at $2.75, a double - a 100% return on investment (ROI) - would be $5.50.
Here's how that sell-to-close order might look. In our case, the sell-to-close trade on this option was filled Thursday at $5.50, so the double was achieved:
There's one more thing: If you see profit on the position before the price of your sell-to-close, GTC order hits, you can still go ahead and close the position.
In order to do that, I would encourage you to take caution and cancel the GTC order first, then place a new sell-to-close order.
The GTC order is the perfect trick for a trader who can't spend all day in front of their trading terminal, or if you're tempted to chase a trade.
Doesn't matter whether you're in the office, getting your brakes done, hanging out with the grandchildren or fishing - once that sell-to-close, GTC order hits, your order will fill and your profits will be waiting for you the next time you check in on your trades.
The way I see it, the GTC order allows you to be able to trade, profit, and have a life.
Tom Gentile is a world-renowned options educator. Twice each week, he publishes his Power Profit Trades to show his readers how fun, easy, and lucrative options trading can be - in any market. Click here to start getting Power Profit Trades yourself, at no charge, and you'll get his latest investor briefing on how to make a cool 100% gain on one of the world's most profitable companies... in less than 30 days.
About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.