When it is the Right Time to Sell? A Consideration When Trading Stocks (Part 2)

Last week I wrote up education on how I assess a time and price to sell a stock or ETF I am trading, (Not holding for the long haul). This week is my Part 2 of When to Sell education, this time as it pertains to my process of when I consider Selling-to-Close my options trades.

Remember I am primarily an options trader. What I am educing you on is my process for options trading. I have, can and will continue to show you ways I select my options trades, but this education is for once I ‘Open’ an options trade.

When I say ‘Open’ an option trade, let me bring up the prior education I have offered in the past.

Opening an option position means entering into a financial agreement that gives you the right, but not the obligation, to buy or sell an underlying asset (like stocks or ETFs) at a specific price (the strike price) within a set time frame (at or by expiration of that option).

What we are doing on Money Calendar Pro ( the publication formerly known as Timed Trader Pro) is to send out an alert to buy/go long the call or put options or go long a call or put debit spread. The alert specifies the price to ‘open’ the trade and to at least go long 2 contracts or an even number of contracts.

We then ascertain a target goal in price. We do that by taking the price of the security at the time of the alert and add to that the numerical value of the Avg. % gain or the largest Power Meter % gain.

The Power Meter data is taken from the powerful scanning tool, Money Calendar – which finds stock with a 90-100% win rate (9 or 10 of the past 10 years) it traded higher or lower over a specific range of days.

We at times may include the target goal on the security, but we assess where we believe the security could go on or before its End Date and how we anticipate the option value then reaching a target ROI % goal of 100%.

Our first initial goal is to get a 100% Return on Investment (ROI) on the option. At 100% ROI the tactic is to Sell-to-Close half the number of contracts  and hang on to the rest until further notice, (this is why we encourage an even number of contracts ‘to open’).

Then if the stock continues in the direction anticipated and the option value on the remaining contracts goes to a 200% ROI we send an alert to ‘close’ the remaining half of the contract position, (in essence the ‘further notice’ is if the option goes up 200%of the initial ‘open’ price of the option.

Process for Options Trading with Money Calendar

• Find a Stock or ETF with a bullish or bearish pattern then consider buying-to-open Calls or Puts (depending on the directional history for the pattern). Another Consideration is to ‘Open’ a Call or Put Debit Spread.
• Realize the Avg. % gain and that is our initial price target goal for the stock or ETF and analyze options that stand a chance at doubling with that anticipated move for the underlying.
• When that target goal for the option is met, sell half the position/half the number of contracts.
• Hold the last half until the option goes another 100% or an ROI of 200% and then ‘close’ the remaining position or last half of the number of contracts in the trade.
• If none of the above scenarios happen sell the entire position in the last hour of trade on the End Date

Here are a couple of examples (many open positions are at 100% on the first half and we are seeing how things go with the last half of their positions.

What if the Underlying Doesn’t Go in the Anticipated Direction?

Securities are like teenagers, sometimes thy do what you want and anticipate and sometimes they don’t.

It’s in those times one can set a stop loss based on the option position reaching a % decline amount like 50% of it original value is when to Sell-to-Close the option. I lean that way regardless of my win loss rate. I’d rather preserve 50% of my original investment versus lose anything more than that up to 100% of the original amount of money paid.

App: Toms Option Tools

Toms Option Tools scan the markets for bullish and bearish trade opportunities using our proprietary scans and strategy algorithms. TTR Darknet finds bullish entries based on triple stack channel collisions. Money Calendar identifies seasonal patterns with at least 90% accuracy looking back 10 years. Weekly Cash Clock finds short term opportunities that last a week on average. Microcurrency Trader applies Darknet technology and moving averages to cryptocurrencies. Velocity Trader utilizes volume spike and Velocity indicators on custom stock lists. Quantum Scripts scans the markets for momentum acceleration signals and employs Quantum noise filters. Optimal Trader finds directional pre-earnings opportunities that are optimized for entry date, stock movement, and volatility surge. My Trades tracks the profit/loss of your trades, displays stock charts and risk graphs, creates new trades, and edits existing trades. Morning Report provides top 10 option rankings in 6 categories each day.

Disclaimers

Stock and options trading has large potential rewards, but also large potential risk.

You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.

This is neither an offer to buy/sell/ or recommend a particular stock or option.

Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.

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