Be the first to like this
Execution of Options Trades
Although an options contract may not expire for months, its value can vary significantly from day to day and even hour to hour. Thus the execution of options trades in a professional and timely fashion is what leads to profits. A profitable option trade is based on a good knowledge of the fundamentals of the stock, commodity or currency that underlies the options contract. It is based on a sound analysis of market sentiment. But optimal profits come from execution of options trades at the very best time and manner.
Overview and Sense of the Market
Let us say that you purchased a call of XYZ Company. You paid $3 a share or $300 for the contract. The stock was selling at $78 a share when you purchased the option. You did so because you believed that the stock would rise in price and you were right. The stock is now selling for $91 a share and your call option is now worth $16 a share. If you sell right now you can make a nice profit. But, will the stock go higher? Or, might it correct and fall? The same analysis that gave you the insight to buy a call on XYZ in the first place is useful in deciding whether to say in the call contract or sell. If you believe that the fundamentals of XYZ warrant a higher rise in the stock you probably want to stay. If you think that market sentiment will continue to drive the stock higher you will want to stay with the contract and not sell. And, if you would like to sleep at night without worrying that the stock will gap down upon opening tomorrow morning, you may simply decide to sell and take your profits.