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Strategies & Market Trends : Playing the QQQQ with Terry and friends. -- Ignore unavailable to you. Want to Upgrade?

To: Gush who wrote (627)	6/4/2005 8:32:36 PM
From: Walkingshadow	Read Replies (1) \| Respond to of 4814

Hi Gush, I think the exit strategy will be key, and has to be driven by the most important thing anybody can learn about options: OPTIONS EXPIRE ! So it seems to me that there is a very high likelihood the position will become profitable, and that will probably happen sooner rather than later. But it is certain that any profit will eventually evaporate, because it is certain that the contracts will become worthless. So timing is everything, and my experience with these sorts of things is that plotting out an exit strategy in writing beforehand, and sticking to it, is the only thing that will save you. Otherwise, greed creeps in, and causes you to hold, thinking your profits will increase. Maybe they will, but hold long enough and it will turn against you for sure. Without knowing your position size, it is a little hard to judge. But assuming you've got a big enough position, I think I would do the following: 1. Place a limit sell order at 25% profit for the first half of the position. 2. If that hits, and IF it hits within two months, place a limit sell at 50% profit for half of what is left. 3. If the 25% initial target is not hit within 2 months, place a sell limit at 30% profit for the entire position. 4. If within 2 months the first 25% initial target is hit, but the second 50% target is not, place a sell limit at 40% profit on the entire remaining position. 5. If the first two targets (25% and 50%) are hit within 2 months, place a stop loss (not a mental stop) at 35% profit for the remainder; every time the position increases in value by 10%, raise the stop another 10% also no matter what. Keep doing that until you are stopped out. NEVER lower the stop; adjust the stop upwards ONLY. 6. If an overall profit of 100% occurs no later than 3 months before expiration, take it; liquidate the entire position. 7. If an overall profit of 75% occurs no later than 2 months before expiration, take it; liquidate the entire position. 8. Liquidate the entire position no later than 1 month before expiry regardless of current profit/loss status. I would not place a stop (except for #5 above); that just encourages the pits to gun the stop, but I WOULD place a mental stop of 30% loss. Obviously, there are many possible variations on the above, and this could be further refined, but whatever you do should make sense to YOU. This is just my suggestion, and is partly based upon the volatility of UNH, and my anticipation of how UNH is likely to move over the next 6 months. But the key thing is that methodically taking profits will favorably influence your risk/reward. And, that once you have a plan (hopefully by Monday!!!!), and it makes sense to you and you think it is a good plan, STICK WITH IT NO MATTER WHAT. In short: plan the trade, trade the plan. ....all IMHO, of course. T