Lately, I have enjoyed getting back to options basics to help new traders gain trading confidence.
Once you understand how calls and puts work, and what they are, it's important to know how you are going to manage your trades and how to exit for profit.
In this clip, I explain my favorite way to manage calls and puts to maximize profit.
It takes discipline to sell your calls and puts when they are doing well, but it's important to get into the habit of taking profit when you can.
I like to buy calls and puts in multiples of 2 or 4 so I can sell some for profit and let the rest ride.
As the saying goes: pigs get fat, but hogs get slaughtered - and even though your trades might make more money, it's important to get into the habit of taking off some profit as you go.
You can't lose making gains, right?
Here's how I typically manage calls:
If I buy a multiple of 2, I sell half at 100% profit and let the rest ride.
If I buy a multiple of 4, I sell half at 100% profit, the next ¼ around 150-200% profit, and let the rest ride.
And here's how I typically manage puts:
If I buy a multiple of 2, I sell half at 50% profit and let the rest ride.
If I buy a multiple of 4, I sell half at 50% profit, the next ¼ around 100-150% profit, and let the rest ride.
I recommend exercising as much discipline as you can - even from the start of trading - to maximize the gains you take home.
You don't have to manage your trades exactly how I do, but it's important to have a plan for taking profit before you open your next trade.
Until next time,
Mark Sebastian
The post How to Manage Calls vs Puts appeared first on The Profit Takeover.
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