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When do you close option positions?

There are different ways in which to handle when to close an option position.

Many people will typically hold an option position until the very end of expiration, as they either feel they want to get the most out of the trade and hold as long as possible, or they don’t realize they’re allowed to get out sooner.

Sometimes holding until the end is a good strategy and sometimes not.

If you bought an option and it doubles in price, is that good enough for you?

Over the years, I've seen investors holding profitable option trades turn into losers because they didn't take profits when they had the opportunity.

It's key to have an exit strategy. Unlike stocks, options have an expiration date and many need to be acted upon before that time. You don't need to hold until expiration.

In my opinion, you should get out of a winning position once you feel the underlying may have reached a certain area. What area? An area which you have decided ahead of time that meets your criteria.

You can also get out of a winning trade if the option doubles in price. Take profits on your original stake and let the rest ride.

With a losing position, you should set a stop-loss area on the underlying stock (not on the option price itself). If the underlying moves say 25% beyond your entry area in the wrong direction (for example), then you could look to close the trade.

In the end, getting out of an option trade is an individual decision, so the above examples are just some ways I look at it.

What's your strategy? Give us your comments.



Mar 11, 2018

Yes, I was referring to a winning option position that doubles in price. And yes, you're also right that a "sold" option position that doubles in price would put you in a losing position at that moment in time.

Thanks for the comment.


Robert Simmers
Mar 10, 2018

" You can also get out of a winning trade if the option doubles in price." Are you referring

here to the BUYING of put options, rather than to the SELLING of put options? If the price of a put option that we SOLD has doubled, isn't that a LOSING position; not a winning position? Thank you.

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