Hey Traders,
I got a little options tip for you today.
The other day, I was looking at an option that was up around nine bucks on Friday, but the market was closed on Monday.
Come Tuesday, it opened down at $5 — it dropped four bucks just like that.
A lot of folks miss the great exit price because they hang on to call options too long when they buy them.
Personally, I don’t recommend buying options — I prefer selling them.
But for those of you who do buy them, here’s a tip: take your profit earlier than you might think.
Why? Because if you don’t, that time decay will start eating away at the option’s value, especially as it gets closer to expiration.
In that last week before expiration, it can really drop fast.
So, if you’re buying options, you could set a limit above your purchase price, say 50% higher, and let it trade up to that.
Or just keep an eye on it and if it pops, consider selling it because the stock price likely won’t keep climbing. If you hold on too long, the option price could tank.
In today’s market, the Dow Jones is down, and the NASDAQ is a bit down too.
Options are just drying up. Without a big underlying move in the stock, the option won’t move much. Sometimes, even when you’re right about the stock, the option doesn’t move as expected.
I’ve got a million reasons why you should sell options instead of buying them. But if you insist on buying options, take my advice and sell earlier than you think.
Don’t hold on to those options longer than you have to.
Remember, no one ever went broke selling at a profit.
Trade well,
Jack Carter
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