S&C Magazine Current Contents Q & A Explore Your Options RIDING A CORRECT CALL
RIDING A CORRECT CALL
- Details
- Parent Category: Q & A
- Category: Explore Your Options
- Written by Tom Gentile
What are your thoughts on staying in a winning long call position?
There’s an old saying that refers to letting your winners run. We agree to a certain point — that point being a reasonable amount as dictated by a percentage return such as half of your initial investment. When a long call gets to certain levels of profitability like 50%, there are typically strong opportunities to adjust into a better-suited position without the risk of giving those profits back.
Most simply, a trader long a call with open profits could exit a percentage of the position. In selling out some but not all of the contracts, he or she can lock in a guaranteed profit while maintaining upside exposure.
Similarly but using options, the trader might consider establishing a nicely priced vertical by selling a higher strike call.
Another choice could be to close the entire position, take a portion of those profits, and roll out and up. This would allow the trader to ride what’s been a winning position longer than otherwise. All told, there are plenty of options in letting a winner continue to run but more smartly if your outlook remains optimistically predisposed.
