Why I Pulled Profits On My Last Position.

From Greg M

Lions and friends…

I got a very good question from a gentleman named Justin regarding my last position and why I closed it only to open another.

This was his question.

What was the purpose of selling out on your PUT position expiring in August and open up another one with the same expiry and lower price? Will the $4.04 PUTS profit more then the same amount on contracts at $4.10?

Here was my answer.

That position, although profitable was volatile. I added to that position BIG TIME on the way up... was running low on capital reserves.

Lions…

IT IS IMPERATIVE that you have capital in reserve when you open an initial position.

Capital Reserves.

When you open a swing trade, you ALWAYS start with a small initial position and keep cash in reserve. You open with a small initial position looking for opportunities to build the position IF you still believe that you are on the right side- that is the trade will play out as you intended.

You also always buy options which expire out several months, to allow your trade time to work.

Even with all this, there is no guarantee that the trade will work however, if you play your swing trades similarly over time you will make money managing your position like this.

GM