tag:blogger.com,1999:blog-973587304515257848.post1553327729891691432..comments2024-02-11T00:12:56.047-08:00Comments on IN THE MONEY TRADES: Psychological vs Financial CapitalAnonymoushttp://www.blogger.com/profile/02083421527404780093noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-973587304515257848.post-3209255858335529552010-06-16T14:47:12.130-07:002010-06-16T14:47:12.130-07:00That's kind of how I'm leaning, for some r...That's kind of how I'm leaning, for some reason the 90% threshold makes sense to me, I can justify leaving that much on the table repeatedly in return for taking off 100% of risk. I also favor taking things off if 50% or more of the return can be taken in when 75% or more of the contract time remains. So if you get lucky and call something exactly right, might as well take it off and book half the gain and look to put the same play back on again if it presents itself. From a position of buying power and capital efficiency I like this. It really doesn't come in to play until you're actually allocating a larger percentage of your capital than I currently use.Jason Haashttps://www.blogger.com/profile/08138027111150684908noreply@blogger.comtag:blogger.com,1999:blog-973587304515257848.post-56013548828290038082010-06-16T13:28:33.237-07:002010-06-16T13:28:33.237-07:00I think if it is .05 or less it should be an easy ...I think if it is .05 or less it should be an easy decision as TOS does not charge any commission to close out such trades. But I see what you mean about it depending on how much you sold it for. Maybe you set a rule that anything that is >=85% in the money that you close out without thinking twice. Or something like that.Anonymoushttps://www.blogger.com/profile/02083421527404780093noreply@blogger.comtag:blogger.com,1999:blog-973587304515257848.post-12469037867943937262010-06-16T12:08:32.033-07:002010-06-16T12:08:32.033-07:00I actually thought about the situation you're ...I actually thought about the situation you're describing already. I kind of like to look at the trades daily and ask if I still like it, would I put it on again today, because in my mind, not taking a play off is essentially the same as implementing it again. So what about this situation: you sell a 114/116 credit spread and receive .50, you're comfortable with the .50/1.50 return on risk. The next day you can take the position off for .25, do you take it off? because if not you're now risking 1.75 to make .25. Initial and subsequent return on risk is something I'm having an issue with. Buying something back for .05 to me depends on how much you initially sold it for. If it was a $1.00, sure, I can leave 5% on the table for the piece of mind and no more risk. But if it was .35, I don't know. All the nickels and commissions add up over time. I guess there isn't a golden rule, it's all on a case by case basis. I guess more experience and I'll eventually find a comfort level with what to do. I don't view the decision as a right vs. wrong, just looking for a risk mgmt decision rule of thumb to help take away some anxiety or indecision.Jason Haashttps://www.blogger.com/profile/08138027111150684908noreply@blogger.comtag:blogger.com,1999:blog-973587304515257848.post-84962633597303263062010-06-16T11:52:38.288-07:002010-06-16T11:52:38.288-07:00For me I would like the peace of mind to take off ...For me I would like the peace of mind to take off the risk, especially if I can buy the contracts back for .10 or less. Like we talked about at the Traders expo, I think it is more beneficial to look at it as how much of the profit you have collected, for example instead of thinking you are leaving 10% on the table, put another way is that you are booking 90% of the profit. And in my opinion the risk of the trade has now changed.<br /><br />Here is what I mean. If at the intiation of the position you were risking $500 and the most you could make was $1,000 and you could book profits of $900 today (booking 90% of profit potential)then you have to realize that you are no longer just risking the $500 now you are risking the $500 + the $900 in profit. So you have to ask yourslef is it worth the risk of $1,400 for that last $100?Anonymoushttps://www.blogger.com/profile/02083421527404780093noreply@blogger.com