Hey AI Option Gurus,
Welcome to Thursday Tips with Gautam!
September’s market is on a surprising rally—unusually resilient for this time of year. The typical September dip might’ve come early, but don't worry—I’m betting we’ll see another dip in October.
For us options traders, it’s all good news. We make money whether the market’s going up, down, or just hanging out doing nothing.
This Week’s Focus: Taking Profits Early
Let’s talk about when to take profits. I’ve been on the wrong side of a trade more than once—up 90% and feeling like a genius, then BAM, it flips, and I’m ITM (in-the-money) for all the wrong reasons.
Chasing that last 10%? Big mistake.
So now, I take the smart route and lock in those gains early.
Here’s my golden rule:
If I’m 80%+ profitable on a trade and there’s more than a week to go before expiry, I close it. Done. Profits banked. 💰
If I’m 80%+ with less than a week left? I usually let it ride until expiration, and most times, it expires worthless. 🎉
Why Close Early?
Avoid market surprises. If you’re sitting on an 80% profit with more than a week to go, why risk it? Markets can get messy.
Free up that collateral. If it’s a Cash Secured Put (CSP), closing early means you can use that money for the next trade. Keep that cash moving, and your portfolio growing.
Steady Premium Income: That’s the Game
Remember, 80% profit isn’t just “good enough”—it’s smart. You’re earning “free” money (free as in you’re using your time and collateral, but still... it’s better than leaving it idle!).
Now, let’s talk about big premium trades. A long-term CSP on NVDA is a great example. Let’s say you sell a put with a strike price of $120, expiring in September 2025. That’s right—a year out. You could snag a sweet premium of $2000.
Here’s the catch: your $12,000 collateral is locked up for that year. But NVDA’s volatility means the option value can change fast. You might see a 30% profit within days or weeks.
So my move: Close the trade at 50% profit. You’ll pocket $1000 and free up your $12,000 for the next CSP. Why wait for the full $2000 when you can rinse and repeat for faster gains?
Abbreviation Cheat Sheet for Newbies 📚
Here’s your quick guide to decoding the options lingo:
BTO = Buy to Open
STC = Sell to Close
STO = Sell to Open
BTC = Buy to Close
Final Tip: The Wheel Strategy 🛞
Got cash? Sell puts. Get paid cash premium.💰
Assigned on puts? Congrats, you’ve got shares! 🥳
Got shares? Sell calls. More premium.💰
Shares called away? Great, now you’ve got cash! 💸
Repeat! The wheel keeps turning.🛞
Remember to register for my weekly options review classes. We discuss these kind of tips thrice a week on Tuesdays, Thursdays and Sundays.
Register at: www.appmosis.com/subscribe
Happy Trading, and see you next week!
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Gautam Godse
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