|  | How do I know when to take profits? | | Individual trading strategies (when to enter and exit for profit or loss) must be set by you based on your complete game plan (combining an understanding of your tolerance for risk with your trading method and approach to money management). You must monitor your positions carefully. Remember, we don't manage your trading money. The way the Options Hotline works is, "I pick 'em, you play 'em." I do provide some guidance about stop-loss levels and profit taking for you to use in your decision-making. My target price for an underlying instrument provides reasoning for the options purchase and can be helpful in considering an exit point. For example, in October 2000 my recommended puts (downside bets) on the Dow Jones index (with a strike price equivalent to Dow 10,800) and Microsoft (with a $60 strike price) became highly profitable. My Dow target was 9,800 and my objective for Microsoft was $50. Both the Dow and Microsoft plummeted. The Dow reached below 9,700 and Microsoft shares fell below $49. The options multiplied. But both underlying instruments subsequently reversed course, rising to wipe out the options' intrinsic value. Subscribers who used my targets were able to capture a lion's share of the move. My target price is helpful, but you should not always insist that the underlying instrument achieves it before you take profits. Because of the influence of time on option prices, a smaller move occurring quickly may multiply your option's premium. As a general rule, if an option doubles in price, I recommend you sell half your position and ride the rest for free. In our weekly Open Options Positions Review, I also provide trailing-stop (the adjusting of your stop higher to try to lock-in profit) recommendations when appropriate. | | Back |
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| "I have come across many subscription services and some are just dreadful. This is one of the best ones I have encountered. It's what is referred to as a 'keeper'." -- I. McKay "I'm a subscriber to Options Hotline and two other options newsletters.
To date I've made more money, plus more wins from Options Hotline than any of the other newsletters! " -- Margaret H. |
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