[Ep 4] Would you take 89% profit… or wait for the last 11%?

One thing I’ve learnt from selling options:

I don’t need to squeeze every last dollar out of a winning trade.

For this HOOD options trade, I had already captured around 89% of the maximum profit.

At that point, I had a choice:

Take the 89% profit and close the option early.

Or keep the trade open and wait for the remaining 11%.

I chose to close it.

Why?

Because once most of the profit has already been captured, I start asking a different question:

Is the remaining profit worth keeping my capital tied up and continuing to take the risk?

Sometimes the answer is yes.

Sometimes I’m happy to hold the option closer to expiry.

But for this trade, the remaining 11% wasn’t enough for me to keep waiting.

So I bought the option back, locked in the profit and freed up my capital for the next opportunity.

That’s something my thinking around options selling has gradually shifted towards.

It’s not only:

“How much premium can I collect?”

I also think about:

“How efficiently am I using my capital?”

My usual approach is to start considering taking profit around 50%, but it isn’t a hard rule. Every trade and market situation can be different.

Sometimes taking a good profit and moving on makes more sense to me than trying to capture every last dollar.

What would you do with this HOOD trade?

Take the 89% profit or wait for the remaining 11%? 👇

For recording and educational sharing only. Not intended as investment advice.

#Lemon8SG #lemon8finance #sgparents #optionstrading #cashsecuredput

Singapore

3 days agoEdited to

In my experience with options trading, particularly with HOOD puts, deciding when to exit a trade is crucial for maximizing overall returns and managing risk effectively. Holding onto a position in hopes of small additional gains can sometimes mean tying up a significant amount of capital unnecessarily, restricting your ability to seize other potentially profitable trades. For example, when I realized that I had already captured approximately 89% of the maximum profit on my HOOD put, I evaluated the remaining 11% reward against the continued exposure and the capital I had committed. With about 10 trading days left and $8,500 tied up, I questioned whether waiting to earn roughly $50 more was worth the risk and locked-in exposure. Often, the marginal gain is outweighed by the opportunity cost and increased market uncertainty. Choosing to close the position and reclaim that capital allowed me to reallocate funds, even to selling another similar HOOD put contract with a different expiry, maintaining exposure to the stock under favorable terms while spreading risk over multiple trades. This strategy not only helps prevent potential losses as expiry approaches but also optimizes the use of your available capital, providing flexibility for new opportunities. It's important to note that my profit-taking threshold isn't fixed; I generally start considering partial or full exits once 50% profit is realized but adjust based on the market context and trade specifics. Every option trade carries unique considerations such as time remaining, market volatility, and risk tolerance. Ultimately, the decision to take profits early or wait hinges on your individual trading goals and risk appetite. But from my perspective, securing a substantial portion of profit quickly and freeing capital for new trades can be more rewarding in the long run than holding out for the last few percentage points of gain. This mindset shift promotes discipline and efficient capital management, which are essential for consistent success in options trading.