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Pastimes : Ask Mohan about the Market

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To: D & G who wrote (11826)	12/18/1997 8:54:00 PM
From: Jack Clarke	Read Replies (2) of 18056

DJF: You asked about profit percent on option trades. I have had similar experience to yours in the options game. My biggest mistake is to hold on and let a profit turn into a loss. Inexcuseable, but greed is a difficult emotion to conquer. I do not have a fixed profit objective, by and large, but I often now ratchet stops when the market is going my way. Also I tend to do wide spreads (15-20 points on the OEX)-- rather than naked long options. These spreads can be held much longer and can take a lot of heat until the market (we hope) starts to go your way. For example, yesterday I bought the OEX jan 460/440 put spread for 4 1/2, so the potential profit is 15 1/2 (20 points less the 4 1/2 I paid). You are only out 4.5 rather than 9.5 which you would have had to pay for the naked long 460 put. I would close the short side if it gets near parity, to avoid the risk of assignment. My best single piece of advice is to "ring the cash register" when you have your desired profit and don't be greedy, but I don't have a recommendation for where to put the percent. Also I freeely admit to failing to do this often enough in my own trading. Jack

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