Managing Winners and Avoiding Expiration
Today’s tastybite discusses why we manage winners instead of just holding our trades to expiration. When we manage winners, we close the trade at 50% of our potential maximum profit. This allows us to collect profits more often. If we hold to expiration, we face the risk of decreasing theta in short OTM options, decreasing P/L per day, and increasing gamma. Therefore, we like to manage our winners in order to collect profits more often and minimize risk.