The Option Alpha Podcast 232: Tips and Tricks for Navigating Options Expiration
8 snips
Aug 7, 2023 Navigating options expiration is essential for traders today. Discover the top automated tips for managing your portfolio effectively. Key strategies include adjusting exit options as expiration approaches and monitoring extrinsic value. Learn about the importance of using defined limit orders rather than market orders. Additionally, setting alerts for low liquidity conditions and critical levels between strike prices can optimize your trading performance. Enhance your skills with these practical insights!
AI Snips
Chapters
Transcript
Episode notes
Expiration Frequency Is Accelerating
- Expirations have accelerated from monthly to weekly and daily, increasing management frequency.
- Traders must embrace automation to handle more frequent expirations effectively.
Step Down Profit Targets Near Expiration
- Adjust exit rules as expiration approaches so you lock in profits earlier.
- Reduce profit targets stepwise (e.g., 50% → 40% → 25%) to recycle capital before expiry.
Watch Extrinsic Value To Judge Assignment Risk
- Monitor extrinsic value on option legs and act when it falls near zero.
- Close or hedge legs with extrinsic value under a few cents to reduce assignment risk.