Fight the Urge to Take Profits

Sean McLaughlin
March 14, 2024

I received a great, and well-meaning question from a new All Star Options subscriber about a recent trade we entered in $VLO that offers a great lesson or reminder to those who need it.

Question:

What are your thoughts on when the value of your options hits a 50% gain in one day? The September 175 calls for VLO I purchased hit +48% yesterday. Do you trim/roll/close with such a quick gain? I understand this is more of a personal preference as it relates to what you want to make on a trade, but if you hold those 48% increases, they could eventually increase to +150%!

He kinda answers his own question in the end, but here is my response:

We can’t earn big wins if we take profits early. And we need the big wins to pay for all the small losers that are far greater in number.

In my experience, my biggest winners are usually the ones that start working right away (see our UBER trade that we recently exited, and our IBM trade that we’re still riding, for example. These both started working nearly right away).

I’m not saying VLO will be our biggest winner of the year (or even a large one), but this is how my biggest wins usually start…

We’re all familiar with the phrase: “You never go broke taking a profit.” But the truth is, taking profits early is a very well-worn path to the poor house. We need to break this habit. Personally, it’s been my No.1 focus in 2024.

Trade 'em Well,

Sean McLaughlin
Chief Options Strategist
All Star Charts, Technical Analysis Research

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