Option Investor


Printer friendly version
I recently received a question from a loyal subcriber that may have interest to a lot of you out there.

Dear Mr. Gail:

I have a question for you. After withdrawing some of my equity for
income tax, I am temporarily a little low on margin.
Some of your early spread recommendations have moved a long way in our
favor. Would it be acceptable to close out a couple of the May
positions early at , say a nickel net debit, so I can free up some
equity for either more late May or early June recommended positions?

ANSWER: This is absolutely an excellent idea. A profit is a profit. In addition, you can be sure there will be several times during the year, that 1 or 2 of these trades that we try to squeeze out that last nickel may come back to bite us. Our subcriber brings up an excellent point in regards to profits. Not only does he pocket a profit, but he frees up margin to put on more positions whether recommended plays or supplemental plays. One reason we hold the positions to expiration is that some subcribers feel that closing out the position is costing them not only the $0.05 that the have to buy to cover the position and the commission or transition cost it takes to execute the trade. So for the sake of tracking the ongoing performance the Monthly Cash Machine will show the position result held out to expiration. However we could have an exception where we recoomend a specific position to be closed out early for a profit.

However, like our subcriber has pointed out, do not be afraid to take a profit and run. In some cases you might actually out perform our month's performance if "Murhphy's Law" decides to make an unexpected - "guest appearance". ( which we all should always be prepared for.)

I want to thank our subcriber for his question and I hope his question will remind you all that you do not have to hold all the positions until expiration.

Monthly Cash Machine Newsletter Archives