Options Trading Profit Strategies: CLOSING OUT Trades. TastyTrade & Option Alpha are WRONG

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Options Trading: Closing out trades and closing out winners.

TastyTrade tells you to close out your stock options positions at 50%.

In my opinion, Option Alpha copies a lot of what TastyTrade says and also recommend this.

However, closing out your naked options and options spreads at 50% is NOT CORRECT ⚠️

It’s not optimal.

Mathematically, it doesn’t make sense to close out spreads and naked options at the same price.

Instead, I recommend closing out naked options at 60% – 65% of the premium received.

And spreads should be closed out at 50%.

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Closing out your options trades early reduces your risk.

Option Alpha (who i am not a fan of), recommends closing out your trades at 50%.

TastyTrade, who I believe is substantially better than Option Alpha, also recommends closing out your trades at 50%.

Risk mitigation is extremely important for successful and profitable traders.

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1) How I Decide To Close An Options Trade | Options Trading Concepts
tastytrade
https://www.youtube.com/watch?v=fg9WDm0jHvA

2) Closing the Option Trade
TradeSmart University
https://www.youtube.com/watch?v=iO4d5pypYt4

3) Exiting Options Trades Automatically
Option Alpha
https://www.youtube.com/watch?v=jmtb45fY7Y8

4) Opening & Closing Options Trades | Best Practices
tastytrade
https://www.youtube.com/watch?v=fmfU49SGKJw

5) Closing Option Positions Before Expiration Day
Option Alpha
https://www.youtube.com/watch?v=DtMFGL9MP0c

6) Rolling a Trade | Options Trading Concepts
tastytrade
https://www.youtube.com/watch?v=VqsFQNOocB4

7) Options Trading: Understanding Option Prices
Sky View Trading
https://www.youtube.com/watch?v=MiybniIIvx0

8) How to Trade Options: A Beginners Introduction to Trading Stock Options by ChartGuys.com
TheChartGuys
https://www.youtube.com/watch?v=SB2viufbLEM

9) Robinhood Option trading for Beginners (tips and tricks to make money)
Johnny Crypto
https://www.youtube.com/watch?v=tRMGjwwEZqs

10) Easy Way To Find A Good Call Or Put Option – Options Trading Tips
Trading Fraternity
https://www.youtube.com/watch?v=qcYZqxyJ_G4

https://www.youtube.com/user/bullzandbearz
https://www.youtube.com/channel/UCnMn36GT_H0X-w5_ckLtlgQ
https://www.youtube.com/user/tastytrade1

#optionstrading #options #trading

Comments

BestStockStrategy says:

Please share, subscribe (click the bell for notifications), and let me know if you have any questions! I'm here to help you.

Fred Geschwill says:

Clearly no one has heard of Long term Capital Management. Everyone, it is really simple don't trade naked short options. You will lose sooner or later.

Leith Akallal says:

So if within the first week of selling the put. I make over 20% of max profit, should I close the position?

oo oo says:

you need a lavaler mic for your shirt. Turning toward and away from the camera reminds me of watching nascar. Louder than quieter over and over. It's hypnotizing.

xxx s says:

Sometimes.you have to close if the stock looks weak and price will go down ,its a case by case situation

yobytae says:

Interesting point. I'm a newbie so the point was educational. Thanks for that. But with this clickbait provocative and sensational title, the overall impression isn't good. It's not wrong to say close out trades at 50% instead of 60%, any more than I'm doing "wrong" to close out some of my trades at 40% instead of 50%. If you watch the Tastytrade videos, their backtest results for managing winners ranges from 25% to 75%. So why do they say 50%? I look at it as a rule of thumb. I do not look at 50% as a scientifically proven optimal point of exit superior to 49% or 51%. Or 65%. Or to turn your argument around, close naked at 50%, spreads at 40% or whatever. Educational point, but the negative and confrontational approach makes me lose a lot of respect.

Khaed Hossen says:

The next major step in the Options trading price movement is to chart the level of the main charts and find a fresh trading level from it. Learn from your Forex trading mistakes and go ahead. Focus on strategies such as IQD Momentum Strategy from Lukasz Wilhelm . You can make money from the financial market with it when you find out about it on google. I got a profit of 17,000 dollars in few weeks trading options from investing $ 3500.

DenzioMatri Magx says:

What is the typical length of expiration of your naked puts?

Ron Jones says:

I trade mainly put credit spreads in an IRA account and I dont believe that I can close out my protection at 50% leaving my short side on because it then makes it a naked position and I cant trade naked positions in an IRA account. Is this correct?

muhmurat says:

The argument of saying might as well sell naked option its better actually doesnt make sense. When you sell naked, overnight if the company gets aquired or something happened, next day your account is gone. but having a spread limits that. So that argument is gone.

alfalogic says:

Absolutely correct conclusion that can be easily explained by the difference in Delta's and Theta for naked vs. spread trades. Naked puts will have bigger Delta and time Theta thus should decline more by the time spread achieves 50% decline.

Eric Johnson says:

I only manage my naked (i.e. strangles) options at 50% and I usually keep my spreads on until expiry. But I mainly sell naked. BTW, it seems like most of your videos are focused on other options traders. Usually being very critical. Why not just create content based on how you trade without being critical of others?

Paul Motter says:

What you are saying makes sense – but they have studies that show that selling at 50% leads to a much higher % of profitable trades than waiting for higher returns. It gets you out faster, lowers the hit to your buying power and so frees up more capital for more trades. But that does mean more commissions. But I think they DO mean a return of 50% TOTAL is their actual goal, not just on the "main" trade – See, they price their strategies all at one price, so you don't even see the individual costs of each leg.

Violet Kai says:

Trading is the progressive realization of a worthy goal.

Chace Bonanno says:

Close verticals at 50% and naked options at 60-65%

Abhijit Banerjee says:

you seem to be struggling in simple maths

CookItKeto says:

Tasty manages at 50% to diminish tail-risk and had proven through back-testing that average P/L is considerably improved by managing.

Because naked options have considerably more risk than defined risk spreads, “might as well” waiting could cost you a lot more for almost no additional P/L

Jake Miller says:

To clarify, you're suggesting to close the spread when the net premium decays 50%, not when the higher put option decays 50%?

In your example if I sell a put for $3 and buy a put for $1, we should not close out when the higher (leading) put hits $1.50 but rather around $1.20, because we only care about getting 50% of our initial premium (which isn't the same as 50% of the initial value of the leading put)?

So that means we have to wait longer to close the spread (decaying to $1.20 instead of $1.50) if we want to get 50% of our premium at close, and our premium is 30% smaller to begin with? Or we could wait to close both at $1.20, but then we get 60% of our premium with the naked option and only 50% of our (again, 30% lower) premium with the spread?

I know you're generally against spreads, but is that your actual recommendation (50% spreads and 60% naked) or just what you think Tasty should recommend to be more consistent?

John Stock says:

When trading vertical put or call trade you have two leg position rather than close the trade with GTC you can close each leg differently

John Stock says:

Can you close buy and sell different in vertical option trade

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