Hi Bowledover: Exit strategy... Here's my view. Depends on several variables. I stay flexible.
1. I refuse to automatically use a specific return, like 25% or 30% return.
2. I consider risk/time. If it is a highly speculative play, then I will be more likely to keep stops in place and take profits quicker. Likewise, I consider the time component. For example, I have significant positions in both Sept and Dec JDSU calls. While I believe the Septs are just fine, I like to go 4-6 months out on calls, so I have been gradually taking profits on the Septs and accumulating Dec calls instead. When I do that, I don't even consider a % return before I do it.
3. Stock reaction. This considers price movement, trend lines, volatility, company news, et al. I weigh numerous such factors, and use the "RR Gut" to tell me it is time to sell. I guess that is experience, don't know. But, what I do know is that I can sometimes tell when it is time to take some profits by taking a quick look at the chart, factoring in such variables and the stock reaction. You have to learn the stock like the back of your hand, watch it everyday.
This is what told me to rotate out of QCOM 3 months ago.
4. Position turns against you. Yes, you are correct in that if a call option position turns against me, I get out and I get out now. I want to live to trade another day and I'll drop a favorite stock quicker than you can bat an eye and move on to another on the "RR Radar Screen". Again, I don't have a set % I go by, but usually it is about 25-30% loss and I'm out but that depends on all these variables stated herein.
Preserve capital is rule 1.
5. Greed. If I'm greedy, I hold out for more. This is a tough one, and it is not the best indicator, but a human one. I have caught myself running through the house sometimes, calculator in hand yelling "If JDSU goes up this much in 6 months, look how much money we will have!!!!" Then insert the "Daaaamn" (RR Hammer move).
This style works great for me, but it's not for everyone. I think each person must develop what they feel best to use.
The main thing, however, is to EXECUTE! Further, even small profits add it.
Keep taking small profits over and over and over again until obnoxiously wealthy.
RR |
