Closing Out Option Trades for Triple-Digit Profits
Chris Johnson and Jon Lewis, August 21, 2009
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Use Technicals
Common tools used by traders to identify optimal entry prices for a stock position are the various levels of support and resistance arising from the technical analysis of a stock. The same applies to closeouts. We usually keep an eye on the significant technicals of the underlying asset to identify timely exits for our option positions.
We'll use a return to a significant support level as a signal to close out a put, because that indicates that the stock may be due for a short-term bounce.
Or we may close a call as the underlying asset approaches significant resistance in the form of a declining moving average.
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