Keene on the Market: Trade to Win Using Unusual Options Activity, Volatility, and Earnings

CHAPTER 16

Managing Trades on Expiration

My primary trading goal is simple: to make money. I am not trading on a day-to-day basis to make friends, or to make my clearing firm money, or because I enjoy gambling. My goal is to make the most money I can so that I have money to do the other things I enjoy in life, such as volunteering at the Boys & Girls Club and the local soup kitchen, and spending more time with my family. Obviously, I also trade to have fun, but after making money, managing my positions is my second goal. If I do not manage my positions, I can turn a position with small risk into one with huge amounts of risk. I often compare myself to a hedge fund manager, which means that I make every decision: when to get long, short, exit a profitable trade, or pull the ripcord on a trade that is not working. When I am trading and have positions on in up to 60 stocks, it is imperative I manage them properly.

It is vitally important to manage trades properly on expiration. Since I trade so many different strategies, I have to make sure that each trade is managed properly on expiration. I am not a buy-and-hold investor. I put on positions using the OCRRBTT and HIMCRRBTT Trading Plans (see Chapters 18 and 19). When I am managing my risk on expiration my goal is to not have an options position convert to long or short stock on Monday. That means I have to manage all my calls and puts on expiration, with either stock or options, in order to avoid delivery of any stock. Just as in ...