Taking Profit
By Ernie Varitimos
July 15, 2022
0:00 / 22:55
Taking Profit

How's it going Ernie here. And this is zero days to expiration the zero days to expiration podcast. And today we're going to talk about exiting trades. The good, the bad. I know you wanna meet you to say the ugly, but no, I'm gonna talk about the reality, the real situation, because a lot of people ask me Ernie, how do I know when to exit.

How do I know when I have enough what's enough or then there's the, um, the complaint I couldn't get out. I hear that a lot. I couldn't get out of my trade. So when I hear that, the first thing that I think is okay, we are trading the S and P you know, albeit options on the S and P on either the futures or the SPX, the index.

but one of the most liquid assets in the world and they can't get out of their trade now, it's not because they can't and I'm going to stick the reality right? In people's face. You can't get out of a trade. Not because you cannot, in other words, not because you are physically unable to get out of it.

It's because you. Know how or why, or you just don't want to let me put it another way the market isn't giving you the price that you want. That's what it really comes down to. For most people, they have an expectation. They have an idea in their head about what profit they want to make. And the market came up and it hit that went right to that price, but it didn't the limit order.

Didn't. They say the market wouldn't give me my price.

I said, okay, the market wouldn't give you your price. That's a true statement. The market decided it wouldn't give you your price, but it hit it over and over. Well then apparently that's not what the market was saying was it's price. Think about that just because. The market comes up to your limit order and hits it.

There's no guarantee that now. And when I say hits it, you know, you're looking on the chart and you see, oh, that's the closing price. So whatever that price is, is that the actual asking price, are you giving it an appropriate offer? You gotta remember that every price comes with a bid and an ask a spread.

And on the S and P that spread is pretty tight. Even if you're trading something like a butterfly, which, uh, generally has a much wider spread because you have to satisfy the needs of four separate contracts all at once. But for the most part you can get in and out of any butterfly, just about any time of the day, whether it's during the market cash hours or late at night within say 25 to 30 cents of.

Whatever price that you chose. So in other words, if the price is right there at, um, I don't know, uh, let's say it's at 37, 74. There's the market right there. Your limit says, Hey, I should be making a dollar 25 here because that's what it's saying. It's saying that my spread is worth a dollar 25. How come I'm not getting out?

Well, that's not the price that the market wants. Market. Doesn't give a damn what you want. So the spread is something else. The offering price is something different than what you have. So generally what I've found is, you know, from a technique point of view, I'm gonna talk about this in two different ways.