Option Investor


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A subcriber several months back asked the following question:

Dear Stevel:

I have a question for you. After withdrawing some of my equity for
income tax, I am temporarily a little low on margin.
A lot of the put recommendations have moved a long way in our
favor. Would it be acceptable to close out a couple of the
positions early at , say a nickel net debit, so I can free up some
equity for next months 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. ...etc

Subcribers: It is never a bad idea to determine if you want to close out a position or positions because you feel you want to free up money or are happy with the return and just want to take the profit and run. Don't ever feel like you have to hold any position to expiration if you feel you have enough profit. However, if you want to actually own the underlying stocks that we have sold puts against, then by all means hold the position to expiration, that way you either get the stock ( if the put is in the money) or you keep the enitre premium and you can sell another put for the next month. But that is only if you want to OWN the underlying security

Once again just something to think about.

Of course if we do not recommend you to close any position, then we will continue to hold those positions until expiration

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