When to Sell?

When to Sell?

Question: "Your software identifies when the BIG STRADDLE TRADES are BOUGHT. When do you SELL?"

This is in many ways is a more difficult question to answer than "WHEN TO BUY?". The reason is that the BUY QUESTION is answered when there is a large contract trade of both the PUT and the CALL on the same strike that matches on the same minute. Because the BUY portion of the trade is confirmed by the BIG TRADER, there is not a whole lot of decision making required -- just put on the trade! The SELL portion of the trade is left up to me.

I have discovered that the best answer to the SELL QUESTION is when the desired return on Investment is achieved on EITHER THE CALL OR THE PUT. This is because the BIG TRADER does not sell out his position in the easily identifiable way as when the Straddle trade is bought. I currently have the minimum ROI set at 20%.

This has to be monitored via software and my software does it. My software notifies me when a SELL SIGNAL has been identified on either the CALL or the PUT and I place the trade. On most of the CALL or PUT options there are at least 10 signals per CALL or PUT option, so if you miss one, there will be others.

Sometimes I get the benefit of a GAP UP or GAP DOWN or a NEWS EVENT which causes the ROI to be much HIGHER than my TARGET ROI but generally if the ROI is hit, I close out the CALL or the PUT. "A bird in hand is worth two in the bush".

In my experience, 95% of the trades are closed out when the ROI is hit. However, 5% of the time, either the CALL or the PUT hits the target ROI, but the other leg of the straddle does not hit the ROI. In this case, I make the executive decision to close out the other leg to minimize the loss on the trade. But in my experience this is usually results in a loss of less than 10% on the total straddle purchase price. But, since this loss only happens 5% of the time and I'm getting 20% return (or more) on the other 95% of the trades, this minimizes the loss even more.

Check out the SELL SIGNALS generated to today's date with my software. If you have any questions or would like to discuss how you can make some serious money partnering with me, please email me at: Rob Mapstead.