When to Exit an Options Trade

Knowing when to exit an options trade is the most-difficult part of trading options, according to an OptionsZone survey. But after several years of managing my shorting service and 25 years of trading options, I have some rules.

These rules apply to options trades that are based on fundamentals — i.e., whether a company is great or stinks, the stock will follow — not on technical trading systems. If you are a purely technical trader, well, read this anyway.

My approach is best summed up by the poet — actually the country western singer — Kenny Rogers. His four rules for managing a position: “You got to know when to hold ‘em, know when to fold ‘em, know when to walk away, know when to run.”

Don’t gamble away your profits. Keep reading to learn my options exit strategy.