Exiting a Trade

As it is with entering a trade, you can exit an option trade in a closing transaction by means of either (1) a market order or (2) a limit order. There are two additional ways to exit an option trade that are worthy of discussion, namely (3) a stop loss order and (4) a stop limit order.

I recommend never using a market order to exit a trade, except in extreme situations in which it seems imperative to exit a trade immediately to avoid substantial loss. Keep in mind that the fill price you receive on a market order to sell an option will not be any higher than the bid and will often be significantly lower.

As for a limit order, the situation is analogous to that of entering the trade. You select a price that you believe is reasonable ...

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