Following a well known strategy of selling a cash secured put OTM ,30 delta ,45 dte. The common advice is to check in around 21 dte.
Do you ever close the trade around the 21 day mark if the trade isn't moving (up or down) in order to redeploy the capital? Or do you prefer to ride it out until expiration?
Posted by Professional-Wrap603
5 Comments
Entirely depends on your expectations as to what is likely to happen next and how juicy the initial trade was. I will often look at the annualized rate of return on leaving it open vs taking more risk to redeploy the capital elsewhere.
I personally don’t do anything reflexively at a set time period. Just keep in mind that as you get very to expiration if it does move against you and your position is at risk of going ITM don’t leave it open at on the final day of trading due to after hours risk.
Many exit for a partial profit to realize the gain, take off the risk and free up the capital for another trade. Each trader needs to determine what percentage works best for their risk tolerance, with many using 50%.
Setting up a Good ‘Til Canceled (GTC) order for the percentage can automatically exit at that profit amount.
Provided the option remains OTM then it will exit at the percentage as Theta decay will eventually erode the CSP price. Patience is a critical step to success with options trading.
Depends on your goals. Given that you’re saying it’s a CSP I assume you want to own the underlying, then just let it ride if it hasn’t yet produced profit. If it’s up 80%+ I’d take profit and redeploy. But that’s just me (and I very, very rarely use CSP as a strategy) so you need to figure out what you’d want as a reward for the time invested and risk you’re taking.
As others have mentioned, it depends.
One thing I’ll say is that if “it”, being the option, isn’t moving, you’re indirectly telling me the underlying is declining.
A ticker, strike, expiration, and your cost are always helpful.
Might also be a good question for r/thetagang, since this is a theta decay play.